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THE WORLD BANK PERSPECTIVES ON' DEV'ELOPM0EN'T
Spring 2004
Published by Pressgroup Holdings Europe, S.A. for the World Bank NO . OUN ARIES
* 100% repatriation of capital and profits * Well connected via land, sea and air * Tax free environment * Responsive, business-friendly government * Well developed infrastructure * Established banking centre * Ultra-modem telecommunication facilities * No currency restrictions * Free zones offering 100%/, foreign ownership
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GOVERNNIENTl Of, DUI3AI DEPARTMENT OF TOURISM AND COMMERCE MARKETING P.O. Box: 594, Dubai, United Arab Emirates. Tel: 00971 4 2230000, Fax: 009714 2230022. Website: http: / / dubaitourismr.ae e-mail:knfoOdubaitourism.ae * D D - D D D D - - D
CONTENTS
PART l: Introduction [5] Chapter 1: Introduction to World Bank Group [7] Chapter 2: A New Global Balance: The Challenge of Leadership [9] Chapter 3: Overview of World Bank Activities in Fiscal 2003 [17] Chapter 4: Improving Development Effectiveness [35]
PART II: Regional Perspectives [43] Chapter 5: Africa [45] Chapter 6: Europe and Central Asia [55] Chapter 7: Latin America and the Caribbean [63] Chapter 8: Middle East and North Africa [73] Chapter 9: South Asia [83] SPECIAL FOCUS: East Asia and Pacific [91] Chapter 10: East Asia and Pacific [93] Chapter 11: China and the WTO [99] Chapter 12: Fighting Corruption in East Asia: Solutions [105] from the Private Sector
PART IIl: Thematic Perspectives [109] Chapter 13: HIV / AIDS and Education [111] Chapter 14: Reaching the Rural Poor [117] Chapter 15: The Importance of Land Policies [125] Chapter 16: Making Services Work for Poor People [131] Chapter 17: Realizing the Development Promise of the Doha Agenda [139] Chapter 18: Doing Business: Understanding Regulation [147] Chapter 19: Striving for Stability in Development Finance [159]]
PART IV: Data [163] Chapter 20: Selected Development Indicators [165] Chapter 21: Doing Business Indicators [173] Chapter 22: World Bank Website [181] RU2-SI' IS 4 S
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Conceived in 1944 to reconstruct war-torn Europe, the World Bank Group has evolved into one of the world's largest sources of development assistance, with a mission of fighting poverty with passion by helping pro...... itrstfee las,e aldcrdt,t govrnmetpeople help of55 themselves.the....*.
THE FIVE WORLD BANK GROUP INSTITUTIONS
The World Bank Group is composed of five institutions:
* The International Bank for Reconstruction and Development (IBRD) lends to governments of middle-income and creditworthy low-income countries.
* The International Development Association (IDA) provides interest-free loans, called credits, to governments of the poorest countries.ID
• The International Finance Corporation (IFC) T' lends directly to the private sector in developing countries. I IFC
* The Multilateral Investment Guarantee Agency (MIGA) provides guarantees to investors in developing countries against losses caused by noncommercial risks. IIn
* The International Centre for Settlement of Investment Disputes (ICSID)
provides international facilities for conciliation and arbitration of i -
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Although the World Bank Group consists of five institutions, only IBRD and IDA constitute the World Bank.
[Excerpted, with changes, from A Guide to the World Bank (Washington, D.C.: World Bank, 2003), pp. 3-4]. Through its five institutions, the Bank Group WORLD BANK GROUP MIISSION works in more than 100 developing economies, STATENIENT bringing a mix of financing programs and ideas to improve living standards and eliminate the Our dream is a world free of poverty worst forms of poverty. This role has grown in * To fight poverty with passion and professionalism for relative importance in the world of lasting results. To help people help themselves and their environment international finance in recent years as private by providing resources, sharing knowledge, building sector net financial flows to developing capacity, and forging partnerships in the public and countries have declined, private sectors. The Bank Group is managed by its member *To be an excellent institution able to attract, excite, 7 ~~~~~~~~~~~~~~~andnurture diverse and committed staff with countries (borrowers, lenders, and donors), exceptional skills who know how to listen and learn. whose representatives are resident at the Bank Group's headquarters in Washington, D.C., and Our principles at country offices around the world. Many * Client centered, working in partnership, accountable developinguse countries Bank Group for quality results, dedicated to financial integrity and developingusecountries Bank Group cost-effectiveness, inspired and innovative. H assistance-ranging from loans and grants to technical assistance and policy advice. All Bank Our values Gopefforts are coordinated with a wide * Personal honesty, integrity, commitment; working Graneouparnr,icuiggvrmn together in teams-with openness and trust; rangencluding of artners, overnmentempowering others and respecting differences; agencies, nongovernmental organizations, encouraging risk-taking and responsibility; enjoying our other aid agencies, and the private sector. A work and our families rapidly increasing percentage of Bank Group staff members is based in the countries that receive assistance.
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2. A NEW GLOBAL BALANCE: THE CHALLENGE OF LEADERSHIP 7
Address by James D. Wolfensohn, Z President of the World Bank Group, to the Board of Governors of the World Bank Group at the joint Annual Discussion. In his opening address at the 2003 World Bank-IMF Annual Meetings in Dubai, September 23, 2003, Bank President James D. Wolfensohn said that there is a need for a new balance between developed and developing countries on aid and trade.
Your Royal Highnesses, Mr. Chairman, we were reminded of it by yesterday's attack. Governors, distinguished guests: We mourn Sergio de Mello, an exceptional humanitarian who dedicated his life to = I t gives me great pleasure to welcome you to development-and with whom we worked this remarkable city of Dubai for the Annual closely in many post-conflict countries. Meetings of the World Bank and the IMF. We mourn also Dr. Alya Sousa, our Bank I would like to express my profound colleague whom we lost to terrorism. She was a appreciation to the government and people of committed professional who took pains to look the United Arab Emirates: for their warm after her co-workers. An outstanding person. hospitality, their magnificent preparations-one I visited with both just days before the attack. has only to look at this extraordinary hall-and Like all of you, I feel for the families of those their commitment to making our meetings a killed, and injured, in the blast. How sad our success. world when peacemakers become the targets. Thank you, Chairman Villiger, for your We honor Sergio, Alya-and all who have remarks and for your leadership of these died-by continuing their work. meetings. I can assure you of the Bank's commitment I wish also to thank my friend, Horst Koehler, to help the people of Iraq, just as we have and our colleagues in the IMF, for another year worked to support the people of Afghanistan, of working together in close and effective Bosnia-Herzegovina, Kosovo, Timor-Leste, and partnership. the West Bank and Gaza. One result of our effort is the needs assessment we and our IMF THE REGION AND THE WORLD and UN colleagues will deliver to donors in THEREGIN AND TE WORLD Madrid next month. We look forward to We meet in the Middle East for the first assisting with the reconstruction process in the time-and at a vital moment. The eyes of the years ahead. world are on the region. They are also on us. The Bank has been at work in this region for We meet, 184 nations strong, with a more than half a century. Our first loan here responsibility to show leadership-and set a was, in fact, to Iraq, in 1950-for flood control clear course for development and peace. on the Tigris and Euphrates. We meet in the shadow of conflict and loss. The projects we support today finance The horror of the attack on the U.N. low-income housing in Jordan. Micro-credit to compound in Baghdad is seared in memory-and women in Yemen. Capacity building for a new 7F
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2C .. N u c_ .,. .u _ _. u.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ nation state in West Bank and Gaza. And billion struggle to survive on less than a dollar a cooperation by ten Nile basin countries to day. This is a world out of balance. provide water for 300 million people today-and Over the next 25 years, 50 million people will z 600 million just a quarter century from now. We be added to the population of the rich also assist Saudi Arabia with reimbursable countries. About one and a half billion people technical assistance. will be added to the poor countries. Many will Knowledge and the exchange of ideas are experience poverty, unemployment, and key to our collaboration. That is why we have disillusion with what they will see as an prepared-together with scholars and experts inequitable global system. A growing numbers in the region-four new reports on will leave their home countries to find work. employment, trade, gender, and governance. Migration will become a critical issue. That is why our website and its wealth of There is further imbalance between what development experience are available in Arabic. rich countries spend on development z This is an ancient region that has given assistance-$56 billion a year-compared with civilization so much-in science, mathematics, the $300 billion they spend on agricultural culture, and religion. And yet, it is also a young subsidies and $600 billion for defense. The region where an astonishing 60 percent of its poor countries themselves spend $200 billion on people are under the age of 25. defense-more than what they spend on I would like to offer my remarks today education. Another major imbalance. particularly to the young people of the Middle Developing countries are projected to grow East-and of the world. at twice the rate of developed countries. But Last week, in Paris, I met with youth leaders many will need help to bridge the gap between z who represented organizations with more than rich and poor. Pressures on environment and 120 million members worldwide. The meeting natural resources, like water, will become also included rural youth and street kids; central issues. Interdependence will be more children orphaned by AIDS and civil conflict; evident. Opportunities will expand, but so will youth from the excluded Roma community; and dangers. young people with disabilities. Three years ago, world leaders gathered at They met in peace and with mutual respect. the Millennium Summit to assess the future. They asked why our generation could not do They committed to cut poverty in half by 2015. the same. They agreed on Millennium Development They said: we are ready to be part of the Goals-for health, education, and equal solution, to be partners. But, they also said, we opportunity for women. They set targets for the do not want a future based only economic environment, from the air we breathe to the considerations-there must be something more. preservation of our forests and oceans. They challenged us about values and beliefs. These are remarkable goals. Many leaders My colleagues and I were inspired by their spoke of them as being morally right. Our passion and idealism. We invited four human responsibility, but also in the global representatives to join us here today to witness interest. They agreed on a bargain-one that our shared commitment. was spelled out in meetings in Monterrey and Soon, young people will start working in the Johannesburg. Bank's country offices, to help review projects Developing countries promised to strengthen and suggest initiatives-as is already the case in governance; create a positive investment Japan and Peru. We will also ask governments climate; build transparent legal and financial to make it possible for youth to participate in systems; and fight corruption. discussions of poverty reduction strategies. And Developed countries agreed to support these we will come together in 12 months time to efforts by enhancing capacity building, take stock of how far we have been able to increasing aid, and opening their markets for come in our partnership. trade. Mr. Chairman: by the year 2015, there will be There was unprecedented agreement on the 3 billion people under the age of 25. They are bargain and the actions required to achieve it. the future. But, as the young people in Paris What are the results? said most forcibly, they are also the now. The developing countries' policies and And their expectations of us are high. governance have never been stronger. As I To respond to them, we must address the mentioned, they are growing significantly faster fundamental forces shaping our world. In many than rich countries. But this good news should respects, they are forces that have caused not blind us to other important realities. imbalance: Progress on poverty differs sharply among In our world of 6 billion people, one billion regions. own 80 percent of global GDP, while another China, with 1.3 billion people, will achieve 2 -
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Tel: +970 2 296 9800 Email: [email protected] Fax: +970 2 296 9801 www.palbanking.com 5 99 Ra m aIIa h NC most of the Millennium Goals. India, with a made significant efforts to fulfill their part of billion people, is on track to meet the poverty the global bargain. But they do not see enough > goal. delivery on the other side. z But in many other countries, the Goals will The recent impasse at Cancun is a case in not be met. point. Two-thirds of the world's poor people Sub-Saharan Africa, with 600 million people, depend on agriculture for their livelihood. As C will fare the worst. The number of people living the developing countries see it, rich nations put r in absolute poverty will increase, not decrease. forward proposals that did not respond to their Only half of Africa's children will complete central demands in this crucial area. They also primary school; 1 in 6 will die before they reach found unacceptable a view of negotiations in the age of five, many from AIDS. which they are expected merely to respond to Like the young people I met in Paris, I ask: rich-country proposals. why? At Cancun, developing countries signaled z Part of the reason is that reform is not their determination to push for a new happening fast enough in the developing equilibrium. They signaled that there must be nations. There is still too much cronyism and greater balance between the rich and the corruption. In nearly every country, it is a powerful, and the poor and numerous. They matter of common knowledge where the signaled that for there to be peace and problems are and who is responsible. Frankly, sustainable development, there must be a there is not enough bold and consistent action different set of priorities. There must be against corruption, particularly at the higher greater cooperation. levels of influence. The fact is that aid today is at its lowest z What about the developed countries' part in level ever. It has fallen from 0.5 percent of GDP the global bargain? Here too, there has been in the early 1960s to about 0.22 percent today. progress: And this at a time when incomes in developed Commitments made in Monterrey towards an countries have never been higher. increase in aid of around $16 billion a year by Against this background, the Bank has taken 2006; substantial pledges to fight HIV/AIDS and a close look at how progress toward the malaria, and for conflict prevention and Millennium Goals could be accelerated- reconstruction; and better allocation and use of through better policies, more effective use of resources, including enhanced donor aid, and higher aid levels. Our analysis, based harmonization-as in the Rome Agreement on current plans, finds that: earlier this year. * First, aid is being used more effectively But these actions-while laudable-do not today than ever before-because of match the promises made. improvements in many developing countries In Dakar, donors said no sound primary and in the improvements in the allocation of education project would go unfunded. They development assistance. committed to an "Education for All" initiative * Second, our analysis shows developing requiring several billion dollars of incremental nations could easily absorb double the extra grant funding for a 5-10 year period. Yet, $16 billion per year promised in Monterrey for today, under the "fast track" program, only 2006. seven countries have received a promise of And this is a conservative estimate. The $50 funding, only for a total of $200 million over billion in additional aid per year proposed by three years, and reaching less than 5 percent of Chancellor Brown could be put to effective use the 115 million children who are not in school. very quickly. This naturally leads developing countries to The prospect of such funding would be concerned about where the additional encourage developing countries to make more resources will come from-to help them open rapid reforms. Leaders are more likely to take schools, hire teachers, and plan for secondary, action if they know that resources are as well as primary, education. forthcoming on a consistent basis. They will not They worry that resources needed to meet move if the financing and benefits of reform other goals are not forthcoming. That debt cannot be assured. relief is not sufficient. And that monies go to Action on trade is equally important. It is the latest crisis or to fight drugs or terror- inconsistent to preach the benefits of free trade rather than to long-term development. They and then maintain the highest subsidies and worry that only half of existing aid flows barriers for precisely those goods in which poor actually reach them in direct cash transfers for countries have a comparative advantage. their programs. And they worry that Developing countries also need to help repayments of debt are crippling their capacity themselves on this point, since they pay to grow. Developing countries feel they have substantial tariffs in South-South trade. z Restoring balance to our world will not life expectancy by 20 years and reducing happen unless there are serious efforts to build illiteracy by half. But now, with just 12 short greater public understanding about the years left to reach the Millennium Goals, importance of poverty and inequity. My multilateral and bilateral organizations must o generation grew up thinking that there were raise their game. two worlds-the haves and the have-nots-and That means moving away from single that they were, for the most part, quite projects-we call them "feel good" separate. That was wrong then, and is even projects-and going for results on scale-in 50 or more wrong now. 500 villages. Or 5,000. The wall that many people imagined to Speaking for the Bank Group, we are taking z separate the rich countries from the poor came a hard look at how we can do better-how down on September 11 two years ago. successful programs can be scaled up. We are linked in so many ways: not only by We now have more than 2,500 staff in the trade and finance, but by migration, field-to be closer to our clients. We are environment, disease, drugs, crime, conflict speeding up project preparation time. Success and-yes-terrorism. We are linked-rich and rates in the projects we support have risen- poor alike-by a shared desire to leave a better from 71 percent in 1995 to 85 percent last year. world to our children. And by the realization Policy performance and good governance are that if we fail in our part of the planet, the rest now priorities in our country dialogues. becomes vulnerable. That is the true meaning We are driving hard on AIDS, education, and of globalization. water, and expanding our efforts in basic We know elections are won and lost on local infrastructure. Working with the IMF and our issues. But it is global issues-and especially HIPC partners, we are providing some $52 poverty-that will shape the world our children billion in debt relief to 27 low-income live in. Leaders must make the case for countries. And we continue to respond to the z development. It is a domestic as well as an needs of middle-income countries, where many international issue. of the world's poor people live. Learning about other countries and We are leveraging technology, with over 100 :Z cultures-and respecting their values and of our offices connected through satellite. We aspirations-is imperative. We need to teach do 1,500 video conferences every month and our children about the rest of the world. The reach more than 60 countries every day. The o young people I met in Paris live as global Development Gateway has about 100 partners citizens. They have a grounding in their own helping to build capacity and provide an cultures, but they respect others. information base for the development So do the young people of Dubai. Last community. Sunday, the Bank convened a conference at the We are introducing a new "client card" Women's College here. We connected by which gives policymakers and team leaders the videoconference to young women students in same Web-based information we use to Afghanistan, Ethiopia, Jordan, Turkey, Uganda, manage projects, provide financial information, the United States, and Yemen. We asked them and research on a confidential basis. It is a which issues they would like to discuss. They powerful tool for implementation and, above said education of girls; respect for different all, transparency. cultures and religions; stereotypes; dreams; Our other members of the Bank Group gender equity; ethics; art; and unity through family also are making progress: diversity. * IFC is encouraging private sector This was the view of young women students investment in small and medium right here. They are global citizens. And Dubai enterprises-including in Africa-and introducing can be very proud of them-as I am. new approaches like carbon emissions We can feel encouraged that a global poll trading. conducted earlier this year indicated that many * MIGA has continued to increase its focus people around the world see the connection on low-income countries-last year over half of between poverty and stability. In some cases, its guarantees were in IDA-eligible nations. they see it more clearly than their leaders. In the poll I mentioned earlier, people said Mr. Chairman: I have suggested how nations they see the Bank as more client-oriented, can rise to their responsibilities. So too must effective, and relevant. But they warned us to development institutions. continue our efforts to be less bureaucratic, Together-working with governments, civil more flexible-and deliver more results. We society, and the private sector-we have take this feedback seriously. supported the developing countries in their Next spring, we will be co-sponsoring, achievements over the last 40 years: increasing together with the Chinese government, a ICL conference in Shanghai on how to enhance environment. The right to learn. The right to poverty reduction efforts. How to take development. D successful programs and scale them up; how to These are not exotic objectives. All of us z enable poor people to be the central force for want the same, rich and poor alike. There is no change and not an object of charity; how to better time than now to join in a common manage programs over time for results that effort to make a better world. truly make a difference. I hope many of you You are the global leaders to make it will join us in Shanghai. happen. Delay is reckless. This is a time for Taking our efforts to the next level is the courage and action-for a new vision of the challenge for the international community. It is future. the challenge for the Bank-and our world- Mr. Chairman: I do not speak as a dreamer or class team is determined to do it. a philosopher. Like all of you, I too have a family and worry about their future. We have z the resources to make a difference. We know A TIME FOR ACTION how to make a difference. We have the Mr. Chairman: It is time to take a cold, hard courage to make a difference. We must now act look at the future. Our planet is not balanced. to make a difference. Too few control too much, and too many have We all share one planet. It is time to restore too little to hope for. Too much turmoil, too balance to the way we use it. Let us move many wars. Too much suffering. forward to fight poverty, to establish equity, The demographics of the future speak to a and assure peace for the next generation. growing imbalance of people, resources, and Let us respond to the youth from Paris and z the environment. If we act together now, we the students in Dubai. That they can trust us can change the world for the better. If we do and that we will act today-here-in Dubai. not, we shall leave greater and more intractable Thank you. problems for our children. We must rebalance our world to give James Wolfensohn everyone the chance for life that is secure- President with a right to expression. Equal rights for World Bank women. Rights for the disabled and disadvantaged. The right to a clean
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* \ ; .. D X 'U~~~~~~'' r1.1,Ciji.tIr Fr,. j9,1ir: C ."ii%iI- 1r,, Thomas Streiff, Sustainability Expert, Swiss Re Thomas Streiff and his team identify environmental and man-made risks and develop sustainable strategies to cope with them. For example, Swiss Re was among the first to recognise the potential impact of climate change on the financial services industry and to study effective ways of managing associated risks. Offering a combination of expertise and financial strength, Swiss Re is ideally positioned to provide your company with tailored solutions to mitigate your exposure and protect your balance sheet - ensuring, in a climate of uncertainty, that you feel secure www swissre.com Expertise you can build on. Swiss Re iii 3. OVERVIEW OF WORLD BANK ACTIVITIES IN FISCAL 2003 The sustainable global growth that was predicted to occur as a result of renewed investment spending in high-income countries has not materialized. The threat of war in Iraq was one factor that had a negative impact on worldwide growth in the first half of 2003 as oil prices rose and investor confidence fell. The growth in output for low- and I middle-income countries was 3.3 percent in calendar 2002, up from 2.8 percent in 2001. Growth in developing countries was affected byy the lack of a strong recovery in the industrial countries and by financial and political EJ. uncertainties in several large emerging markets. The demand for developing-country exports j grew by only 2.5 percent, whereas prices for non-oil commodities rose by 5.1 percent. Net 2 Z debt flows were weak, especially to Latin America, and foreign direct investment declined by $16 billion. During 2002 growth differed considerably across the major regions of the developing world, largely as a result of domestic conditions. East Asia's growth was 6.7 percent, fueled by China's growth of 8 percent and conducive regions both registering growth rates of 2.8 policies in other countries. At the other end of percent and 3.1 percent respectively. the spectrum, gross domestic product (GDP) Growth in developing countries overall is growth in Latin America and the Caribbean projected to accelerate to 4 percent in 2003 and dropped by 0.8 percent because of the banking to 4.9 percent in 2004. This forecast partly collapse and government debt default in reflects the end of crisis conditions in several Argentina, uncertainty regarding Brazilian countries where output was severely elections, a worsening of conditions in the compressed in 2002. But it is also founded on a Rep6blica Bolivariana de Venezuela, and a number of crucial assumptions about the decrease of over $30 billion in financial market conditions facing developing countries, flows. In Europe and Central Asia, growth was including some disruptions from military action 4.6 percent, resulting from a sharp recovery of in Iraq but no severe, lasting effects; the activity in Turkey following its 2001 crisis, as well expansion of world trade by 4.6 percent in 2003 as continued gains linked to higher oil prices in (double the 2.3 percent growth in global GDP); Russia and the Commonwealth of Independent and a slight rebound in the flows of foreign States countries. The continued strength of direct investment as well as in modestly positive domestic demand in India led to gains of 4.2 net debt flows from private sources. percent in South Asia, despite the disruptions in In this context the World Bank continued to regional conditions associated with the war on adapt its activities in responding to country terrorism. Growth in Africa and in the Middle needs for knowledge and advisory services, and East and North Africa was sluggish, with the for lending. [Excerpted, with changes, from The World Bank Annual Report 2003, Volume 1, Year in Review (Washington, D.C.: World Bank, 2003), pp. 27-44]. z FCt-XK - 1 FISCAL 20103 HIGHULGHTS reduction to partners with resources. In fiscal 2003, the DM held nine decentralized Country Innovation Day (CID) c1111717TT71111 *M competitions throughout the world and awarded a total of lending of $5.7 billion to Latin America underlying the $2.5 million in grant money, $1.5 million of which was lending program. IDA commitments of $7.3 billion are the mobilized by the Bank's coordinating Country Offices. The third highest on record, with the largest share, $3.7 billion, nine CIDs were held in Brazil, Burkina Faso, Central Asia, going to Africa. Egypt, Ethiopia/Sudan, Guatemala, and, Peru, 11 t n Wd k f cUkraine/Belarus/Moldova, and Vietnam. They identified DYI: the Annual World Bank Conference on innovative project ideas ranging from organic fertilizer Development Economics (ABCDE) held in May in made from coffee waste in Guatemala to a Bangalore, India, with the theme of "Accelerating motorcycle-based fire engine for the old cities of Vietnam. Development," more than 300 researchers, academics, Since 1998, the Development Marketplace has awarded z development practitioners, and students from across India, over $16 million to public and private organizations, South Asia, and around the world exchanged ideas for including civil society organizations (CSOs), universities, and speeding poverty reduction based on research and practical private sector companies, for over 230 groundbreaking development experience. This year marked the first time projects in more than 50 countries. the conference has been held in a developing country. (See www.developmentmarketplace.org.) (See www.econ.worldbank.org/abcde.) H * In December 2002, the Bank sponsored the first Urban Research Symposium, where 280 attendees including an innovative financing program supporting the Bank staff, researchers, representatives of public and eradication of poliomyelitis worldwide by 2005. The private organizations, and members of research networks Investment Partnership for Polio-comprising the Bank, from around the world reviewed recent research relevant mJ~ the Bill & Melinda Gates Foundation, Rotary International, to urban poverty in developing and transition countries. and the United Nations Foundation-will "buy down" an The event marked the Bank's renewed commitment to IDA credit supporting polio eradication, and convert it to a urban poverty research and highlighted the richness and grant, once the government successfully achieves the diversity of research being conducted worldwide. Material objectives outlined in the project. from the symposium, and announcements regarding the (See www.worldbank.org/hnp.) 2003 symposium, can be accessed at the symposium Web ___ Ulf. site: www.worldbank.orglurban/symposium2003. the EFA Fast-Track Initiative (FTI) continued, along with * The Johannesburg Summit 2002-the World Summit strong efforts to support early childhood development, on Sustainable Development (WSSD). This 10-year basic education, girls' education, and addressing the needs follow-up to the Rio Earth Summit took place in of children with disabilities, orphans, and vulnerable Johannesburg, South Africa, from August 26 to children. In March 2003, the FTI donors made additional September 4, 2002. The Summit brought together tens of pledges of more than $200 million in support of universal thousands of participants, including heads of state and primary completion for 2003-05. At the same time, new government, national delegates, and leaders from CSOs analytical work urged countries to recognize the crucial role and businesses to focus the world's attention on of tertiary education in creating dynamic knowledge improving people's lives through environmentally and societies that are key to economic survival. socially responsible growth strategies in a world with a (See "Investing in People," chapter 4.) growing population and ever-increasing demands for food, water, shelter, sanitation, energy, health services, E 7 M -t S. ILD ll =1: and economic security. innovative development ideas, providing seed funding that (See www.worldbank.org/sustainabledevelopment.) links entrepreneurs with innovative approaches to poverty KNOWLEDGE SHARING AND LEARNING these research activities are highlighted SERVICES here. Investment Climate. The Development The Bank's store of development knowledge Economics Group (DEC) works closely with other has always been an important element of its Bank units and local partners to carry out assistance to client countries. Knowledge investment climate surveys-large, random activities range from carrying out country surveys of private firms in specific sectors, such research, to developing analytical and as garments, electronics, and information conceptual frameworks for country assistance, technology. This research helps clients to initiating outreach that enables client understand the main problems in their countries to access the available global investment climates, identify the reforms that knowledge. The Bank's knowledge activities in would effect the biggest results, and implement fiscal 2003 are described below. those changes. The surveys focus on the key bottlenecks Research that firms face, such as poor infrastructure, Country research forms the core of the Bank's inefficient government bureaucracy, and knowledge base, and it culminates in a number corruption. Because these samples are large, of knowledge products, including policy Bank researchers can relate differences in firm research working papers, development data, performance to various investment climate development prospects analysis, and a wide indicators. From this work, they can conduct range of development publications. Three of thought experiments: for example, estimating U~~~ AX ------ - il - Cs ~~~~~~~~~~~z what Bangladeshi firms would experience in quantity, and poor quality. The service delivery terms of faster growth if Bangladesh's chain involves three sets of actors: poor people investment climate reached the mean level of as clients, the providers of services, and the China's investment climate. Thus, one aspect of politicians who set policy for service delivery. the Bank's work is to measure the investment Improving services for poor people requires climate objectively and link it to firm reforming and strengthening the three performance so that countries (and cities within relationships in the chain-between poor countries) can gauge their progress and identify people and providers, between poor people priority areas for reform. and policymakers, and between policymakers A more important objective, however, is to and providers. Governments, citizens, and stimulate real change. These surveys can only be donors can make services work by putting poor done with the close cooperation of the business people at the center of service provision, by community-both local and foreign-in each enabling them to monitor service providers, by country. A second stage in the survey process is amplifying their voices in policymaking, and by to work with these private sector partners to strengthening the incentives for providers to bring this information into the political debate serve poor people. and to identify specific reforms that are Poverty Research. Since 1993 the Bank's priorities for private sector development. The Poverty Reduction and Economic Management World Bank and other donor assistance can network has produced an annual poverty then support the identified reforms. progress report, Poverty Reduction and the World Development Report. This annual World Bank. The report reviews the effect of flagship publication incorporates research from the Bank's activities on poverty reduction. (See across the Bank. World Development Report www.worldbank.org/poverty.) 2004: Making Services Work for Poor People examines how education, health, water, energy, Economic and Sector Work and sanitation services are failing poor people The Bank's approach to creating, sharing, and because of inadequate access, insufficient applying knowledge helps augment its IBRD z Table 3.1 Economic and Sector Work Product Deliveries by Type, Fiscal 1998-2003 Number of ESW products delivered Product type 1998 1999 2000 2001 2002 2003 Core diagnostic reports 60 75 63 62 90 120 Other diagnostic reports 134 118 100 74 35 39 Country advisory reports 75 132 79 71 101 124 Regional reports 38 47 50 28 22 36 z Total reports 307 372 292 235 248 319 Other products 21 28 86 100 209 272 Total ESW products 328 400 378 335 457 591 and IDA lending activities, generating a greater impact on development. Bank advisory services , X .L,:L. 2IfFVP 1l,[VI JET include economic and sector work (ESW). ESW lij, N,.'lETWORK products include core diagnostic reports that theor anlysisth County Assitance The Global Development Learning Network X14 underpin the analysis for the Country Assistance (www.gdn.org) represents a growing partnership of X4 Strategy (CAS) and the Bank's overall policy dia- public and private organizations committed to logue; other diagnostic work that provides development and poverty reduction. In more than 50 upstream analysis for formulating and imple- distance learning centers around the world, partners use l menting effective lending programs and assessing interactive technologies for knowledge sharing, menting ~~~~~~~~~~~~~coordinating,consulting, and training with the goal of their results; country advisory and regional capacity building. Recently the network provided a z reports that provide advice on special topics; and forum on the stigma and discrimination related to other more informal products, including policy HIV/AIDS for decision-makers and community leaders notes, and events such as workshops and confer- across regions. The forum enabled participants in Barbados, China, Moldova, Tanzania, Thailand, and ences. As the main analytical and advisory tool, Uganda to address the challenges of living with the ESW program is closely monitored by the HIV/AIDS and to explore various initiatives to raise Bank. Table 3.1 shows ESW products delivered by awareness and combat discrimination. 0 all regions from fiscal 1998 through fiscal 2003. their skills, acquire global knowledge from Sector Strategy Papers multiple sources, and then adapt the new Sector Strategy Papers (SSPs) examine the major knowledge to their country institutions and economic sectors and thematic areas in which the policies. WBI also helps World Bank operations Bank is engaged. These comprehensive reports teams design and deliver the capacity-building are crafted after thorough research and extensive components of lending projects. In fiscal 2003 WBI dialogue among staff and major stakeholders, delivered programs in the key corporate priority and they represent a comprehensive body of areas of human development, poverty reduction knowledge. They provide strategic options and and economic management, environmentally guidance for operations staff. In addition, they sustainable development, and finance and private identify the Bank's strategic priorities for each of sector deve the areas of work and present a plan for carrying WORLD BANK LENDING IN FISCAL 2003 out the SSP in the context of CASs. Bank manage- ment regularly monitors how well the SSPs are The World Bank comprises cooperative institu- being implemented. In fiscal 2003 the Bank pro- tions that mobilize financing from member duced three SSPs: "Reaching the Rural Poor," shareholder equity, by borrowing from the "Water Resources Sector Strategy: Strategic international capital markets (for IBRD), and by Directions for World Bank Engagement" and "A means of outright contributions from the richer Revised Forest Strategy for the World Bank member countries (for IDA). It channels these Group." resources for the benefit of poor people in bor- rowing countries. Capacity Building: The World Bank Institute The Bank's lending focuses on work at the The World Bank Institute (WBI) builds capacity in country level and reflects the Bank's focus on client countries through training courses, policy achieving the MDGs. Lending is tailored to advice, knowledge products, and services aimed at individual country needs, with lending helping countries achieve their development instruments that are becoming increasingly goals. WBI's services are designed to help flexible. government and civil society stakeholders upgrade The clients of IBRD are generally the middle Iankworld Inc. Manaim ernent Consultants Modernizing the World '1s* f, . of Banking and Finance around the # 7 Globe Albania Azerbaijan Egypt Kosovo Pakistan UAE Bangladesh Georgia Kyrgyzstan Russia Ukraine Belarus India Lithuania Slovakia Uganda Cambodia Iraq Macedonia Sri Lanka Uzbekistan Croatia Jordan Moldova Tajikistan Vietnam Czech Republic Kazakhstan Mongolia Tanzania Yugoslavia -inancial Sector Modernization istitutions, Infrastructure and Regulation The key to a robust economy, strong private sector, long-term growth and stability and job creation is a strong financial sector. Financial regulation protects the public and bolsters public confidence in the financial market. Bankworld has the tools, experience and expertise to help itic i , strengthen their financial systems. * Bank Supervision * Financial Sector Legal Reform Uf1tEL.JifTU1sU * Problem Bank Resolution .____ *Commercial Bank Modernization W=__ * Anti-Money Laundering - * Accounting and Audit Modernization * Insurance Industry, Actuary and Regulation * Non-Bank Financial Institutions Modernization and Regulation C' * Microfinance Strengthening and Regulation Bankworld Inc. 8500 Leesburg Pike - Vienna, Virginia 22182 - U.S.A. Metropolitan Washington. D.C. Tel: 703-749-5300 * Fax: 703-749-5305 * [email protected] - www.Bankworldlnc.com Figure 3.1 The Project Cycle 1. Country Assistance Strategy The Bank prepares lending and 8. Evaluation advisory services, based on the The Bank's independent Operations Evaluation selectivity framework and areas of C) Department prepares an audit report and comparative advantage, targeted to evaluates the project. Analysis is country poverty reduction efforts. used for future project design. -I i > >so\§° _ ^ ~~~~~~~~~~~~~~~~~~~~~~~~~~2.Identification v _ Projects are identified that support strategies and that 7. Implementation and are financially, economically, Completion socially, and environmentally Z The Implementation sound. Development O Completion Report is e strategies are analyzed. prepared to evaluate ' ./1 the performance of t I both the Bank and ;, T h e the borrower. e oS the borrower. P roj e ct ."' 3.Preparation H ,: The Bank provides iiir. . 5 F Zt'policy and project 6. Implementation C,y cler- advice along with and Supervision e - 7 financial assistance. The Borrower implements . Clients conduct studies the project. The Bank ensures A&. -J and prepare final project that the loan proceeds are ,, documentation. used for the loan purpos-l with due regard for economy, efficiency, and effectiveness..., 4. Appraisal The Bank assesses the economic, 5. Negotiations and Board Approvai .n:r.r: 31, institutional, financial, The Bank andborrower agree oi. r1-a, vr r. r.rr.n;r,r ,i 3.d social aspects of the project. Z credit agreement and the project is presented to The project appraisal document and draft legal the Board for approval. documents are prepared. income countries and, because of the limitation Figure 3.2 Total IBRD-IDA Lending by Region, on IDA resources, some of the larger Fiscal 2003 >:low-income countries that are deemed Share of total lending of $18.5 billion c creditworthy for borrowing. IBRD offers loans that have long maturities and reflect its own favorable market costs. In fiscal 2003 IBRD South Asia 16% . - - Africa 20% provided loans totaling $11.2 billion in support Middle East &- H of 99 projects in 37 countries. North Africa 6% The clients of IDA are the poorest countries, ( I East Asia & which usually cannot afford to borrow on Pacific 12% commercial terms. IDA offers concessional, L A i no-interest loans (called "development credits") taribbean Europe & to these countries, which are normally 31% Central Asia 13% repayable in 35 to 40 years including a 10-year grace period. In fiscal 2003 IDA provided $7.3 Figure3.3 TotalIBRD-IDALendingbyTheme, billion in financing for 141 projects in 55 Fiscal 2003 low-income countries. Share of total lending of $18.5 billion Poverty reduction is at the core of lending from both IBRD and IDA, through investments Environmental & Economic Management 4% from both Natural Resource that support growth as well as investments in Management 6% basic public services. Through partnerships with Rural , / Public Sector other institutions, co-financing and trust funds Development ,/ Governance 13% 10% also are made available for projects. Figure 3.1 - Rule of Law 2% shows the typical cycle of a Bank project. Development Figures 3.2 to 3.4 show IBRD/IDA lending by 9% Financial & region, theme, and sector. Table 3.2 shows Private Sector Human ~~~~~~~Development16% World Bank lending by theme and sector. Developm et 19% Trade & Integration 3% The Role of IBRD Countries with a per capita income of less than Social Development, Social Protection & $5,115 that are not IDA-only borrowers are Gender & Inclusion 5% Risk Management 13% eligible to borrow from IBRD. Countries with Note: See table 2 2. Table 3.2 World Bank Lending by Theme and Sector, Fiscal 1994-2003 (millions of dollars) o 1994-97 19 98 -9 9a x (annual (annual average) average) 2000 2001 2 0 0 2 b,c 2 00 3c THEME Economic Management 1,033.9 1,952.7 799.6 895.3 1,408.0 777.7 Public Sector Governance 1,582.5 2,552.4 2,142.5 2,053.7 4,247.2 2,465.5 Rule of Law 323.0 362.9 373.6 410.0 273.2 456.6 - Financial and Private Sector Development 5,933.3 9,486.0 3,368.4 3,940.9 5,055.4 2,957.5 Trade and Integration 711.9 813.2 426.4 1,059.9 300.9 560.9 Social Protection and Risk Management 1,162.6 2,653.9 1,895.0 1,651.0 1,086.4 2,345.8 z Social Development, Gender, and Inclusion 1,061.3 1,320.5 800.8 1,469.7 1,385.7 1,003.1 z Human Development 1,869.0 2,484.8 1,190.3 1,134.7 1,756.1 3,356.3 > Urban Development 2,099.5 2,403.3 1,036.6 1,458.6 1,482.4 1,576.3 Rural Development 2,327.5 2,746.4 1,413.7 1,822.3 1,600.0 1,910.9 Environmental and Natural Resource Management 2,859.7 2,018.6 1,829.4 1,354.6 924.0 1,102.6 - Theme Total 20,964.1 28,794.8 15,276.2 17,250.6 19,519.4 18,513.2 z SECTOR Agriculture, Fishing, and Forestry 1,572.7 2,097.1 837.5 695.5 1,247.9 1,213.2 > Law and Justice and Public Administration 3,241.8 6,127.2 4,525.4 3,843.0 5,199.6 3,947.5 Information and Communication 220.4 179.4 273.8 216.9 153.2 115.3 Education 1,661.5 2,154.3 728.1 1,094.7 1,384.6 2,348.7 o Finance 2,060.9 5,167.1 1,580.9 2,253.4 2,862.4 1,455.3 Health and Other Social Services 1,891.3 3,114.5 1,491.7 2,521.2 2,366.1 3,442.6 Industry and Trade 1,714.0 2,922.7 1,036.7 718.3 1,394.5 796.7 Energy and Mining 3,362.0 2,311.0 1,572.4 1,530.7 1,974.6 1,088.4 Transportation 3,281.0 3,511.3 1,717.2 3,105.2 2,390.5 2,727.3 Water, Sanitation, and Flood Protection 1,958.5 1,210.2 1,512.6 1,271.7 546.0 1,378.3 Sector Total 20,964.1 28,794.8 15,276.2 17,250.6 19,519.4 18,513.2 Of which IBRD 15,027.4 21,634.3 10,918.6 10,487.0 11,451.8 11,230.7 Of which IDA 5,936.8 7,160.5 4,357.6 6,763.6 8,067.6 7,282.5 Note: Lend ng summarized in the 11 main theme categor es and 10 main sector categories in the new thematic-sectora coding system, which includes 68 themes and 57 sectors Numbers may rot add to tota s because of round ng. Please see appendix 11 in volume 2 for detailed IBRD and IDA ending by theme and country a. Bank lending amounts in fiscal 1998 and 1999 are presented together, the two years being exceptional due to the East Asian financial criss. b Due to a recoding of one project there is a discrepancy between these figures and the figures in the 2002 annual report (table 2 2) This discrepan- cy of 2 2 m Ilion shows up in the commitment amounts in fiscal 2002 for Social Protection and Risk Management and Rural Development (with the two themes showing 2.2 mil ion higher and 2 2 million lower, respectively). c. Excludes IDA Guarantees. higher per capita incomes may borrow under currently may not exceed $13.5 billion. special circumstances or as part of a graduation Seventy-five percent of people who live on less strategy. It is important to note, however, that the than $1 a day live in countries that receive IBRD amount that IBRD is prepared to lend to eligible lending. The borrowers typically are countries at any given time depends on their middle-income countries that enjoy some access creditworthiness as individual IBRD borrowers. to private capital markets. Some countries are Thus, countries may be eligible to borrow but may eligible for IDA lending as a result of their low per not have access to IBRD resources because of poor capita incomes, but they are also creditworthy for creditworthiness. In addition, net IBRD loans some IBRD borrowing. These countries are known outstanding to any individual borrower, as "blend borrowers." Even excluding IBRD loans irrespective of the borrower's creditworthiness, to the blend countries, a full 25 percent of Figure 3.4 Total IBRD-IDA Lending by Sector, Figure 3.5 IBRD Lending by Region. Fiscal 2003 Fiscal 2003 Share of total lending of $11.2 billion Share of total lending of $18.5 billion South Asia 7% Africa <1% Water, Sanitation Agriculture, lsi Es & Flood Protection i:hin &_&Forestry 7% Middle East & East Asia & 7% - North Africa 8% Pacific 16% Transportation 15% Law & Justice Administration 20% -~~~~~~~~~~~~~Europe&, Energy & Mining Central Asia 6% 19% Information & Z Industry & Trade Communication Latin America & 4% 1% the Caribbean 50% Education 13% Health & Other Finance 8% Social Services 19% Figure 3.6 IBRD Lending by Theme, Fiscal 2003 Share of total lending of $11.2 billion Note: See table 2.2. Environmental & Natural Economic Management 5% those who live on less than $1 a day live in Resource Management 6% countries that are IBRD borrowers. IBRD Rural De lopment Public Sector provides important support for poverty 9% A\IGernance 14% reduction by helping clients gain access to Urban P. capital in larger volumes, on good terms, with Development Rule of Law 3% longer maturities, and in a more sustainable 9% manner than the market provides. Financial &Private IBRD is a AAA-rated financial institution- Sector Development Human ~~~~~~~~~18% with some unusual characteristics. Its Development I .-T! shareholders are sovereign governments. Its Trade & Integration member borrowers have a voice in setting its Social Development, Social Protection & policies. IBRD loans (and IDA credits) typically Gender & Inclusion 3% Risk Management 12% are accompanied by nonlending services to ensure more effective use of funds. And, unlike [ Figure 3.7 IBRD Lending by Sector, Fiscal 2003 fi commercial banks, IBRD is driven by | Share of total lending of $11.2 billion deeopmentia imact,BDirahrithan prfi $ development impact rather than profit |Water, Sanitation Agriculture, Fishing maximization. & Flood Protection 8% & Forestrv 5% Tice - IBRD LendingH ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~15%Transportation j,Tc New lending by IBRD in fiscal 2003 was $221 P/blic million less than the previous year's level, whereas Energy & / "% the number of new operations approved was Mining _ aiic & higher than last year's, at 99. The new approvals C -,nn-,er..ron reflect smaller average commitment volumes per Industry & 1% operation, as the share of adjustment lending Trade 4% 12% returned to normal levels after a record high last Health & Other year. The decline in adjustment lending Social Servces 18% commitments was offset somewhat by investment lending commitments, which grew to $7 billion, the leading sector for IBRD lending, receiving $2.6 representing the largest volume since fiscal 1999. billion, or 23 percent of the total. Lending to Underlying the IBRD lending program in fiscal Health and Other Social Services was second, 2003 was robust lending to Latin America, with representing $2.1 billion, or 18 percent of the $5.7 billion or 50 percent of total lending, total. followed by Europe and Central Asia with $2 The thematic distribution of lending in fiscal billion and East Asia and Pacific with $1.8 billion. 2003 was led by Financial and Private Sector Lending was not as concentrated as it was in fiscal Development and Human Development. Figures 2002. Whereas only two countries, Brazil and 3.5 through 3.7 show IBRD lending by region, Turkey, made up roughly 45 percent of total theme, and sector. Table 3.3 shows World Bank lending last year, 5 countries, including Argentina, adjustment commitments in fiscal 2000-03. Brazil, China, Colombia, and Mexico had a combined commitment volume equaling 49 IBRD Resources percent of total lending in fiscal 2003. As part of its regular financing operations, IBRD Law and Justice and Public Administration was raised $17 billion at medium- to long-term "It's not just about realising the potential of each member, but developing s - the global relevance of -E accountancy." Christopher Mvunga o ~~~~~~~~~~~~~~~SeniorManager Regional Distribution - Central Africa STANBIC BANK ACCA Member since July 1995 ACCA is the largest international accountancy body. Our unrivalled access to companies, governments, regulators and practitioners gives us a unique perspective on issues facing the accountancy profession worldwide. r ) +44 (0)141 582 2000 / [email protected] / www.accaglobal.com QUALIFIED FOR LIFE Table 3.3 World Bank Adjustment Commitments, Fiscal 2000-03 2000 2001 2002 200t Millions Millions Millions Millions of of of of dollars Percent dollars Percent dollars Percent dollars ; Adjustment commitments z by region c Africa 495 10 908 16 1,437 15 789 13 East Asia and Pacific 552 11 250 4 17 0 100 2 South Asia 251 5 500 9 850 9 615 10 - Europe and Central Asia 950 19 1,132 20 4,743 48 710 12 Latin America and the . Caribbean 2,860 56 2,788 48 2,517 26 3,639 60 Middle East and North Africa 0 0 185 3 263 3 165 3 IBRD and IDA adjustment commitments IBRD 4,426 87 3,937 68 7,383 75 4,187 70 IDA 682 13 1,826 32 2,443 25 1,831 30 l Total adjustment loans 5,108 100 5,763 100 9,826 100 6,018 100 Total World Bank lending commitments IBRD 10,919 10,487 11,452 11,231 IDA 4,358 6,764 8,068 7,283 Total IBRD + IDA 15,276 17,251 19,519 18,513 Share of adjustment loans 33 33 50 33 c Note. Numbers may not add to totals because of rounding. maturities in international capital markets in ensure IBRD's financial integrity. The general fiscal 2003. This funding volume was below the reserve allows IBRD to assume credit risk in $23 billion raised in fiscal 2002. IBRD issued lending to countries at the lowest funding loans with a wide range of maturities and costs, which in turn benefits borrowers. Income structures in fiscal 2003. Product diversification retention has enabled IBRD to maintain helps IBRD expand its investor base and reduce financial soundness through past periods of lending rates on its loans. IBRD's financial both deteriorating loan quality and surging strength is based on the support it receives loan demand. from its shareholders and on its array of financial policies and practices designed to The Role of IDA maintain a high credit standing in the IDA is the world's largest single source of international markets. concessional financial assistance for the poorest countries, and it invests in basic economic and Generation and Distribution of IBRD's Net human development projects. Eligibility for Income access to IDA resources is governed by two basic IBRD earns income from the interest margin on criteria: a country's relative poverty (as its loans (returns on loans less cost of measured by per capita income) and its lack of borrowings), interest margin on investments, and creditworthiness for IBRD resources. The contribution from its equity. Barring unexpected operational income cutoff for IDA eligibility in credit events, IBRD generates net income after fiscal 2003 was a per capita gross national allowing loan loss-provisioning expenses and income of $875. The amount of IDA resources administrative expenses, including its that countries receive depends on the quality of contribution to the staff retirement accounts. their policies to promote growth and reduce IBRD's allocable net income serves several poverty, which are assessed on an annual basis. purposes related to the Bank's mission. A In exceptional circumstances IDA extends portion of net income is retained annually to eligibility to countries that are above the 1< Sb or0 0 pa 4 - 4 -: 0 0 r -~~~~~~~~~~- 2 . \ ' \ b ~~~~~~~~~~~--:~ F_t -s * t .~~~~~.m __ . 1 * Z ~ X ~,. .. . i ~ ~ , , _; ~ ~ i ..- .. -.A z~~~~ :1~~~~~~~~ .m~1g y-* ..~~~~~~~~ I t 2 t'' / ~~~~~~~~~~~~4 i,W'\ ' ~ ~~~''-- ~ ~ ~~~~~~~' -Of 9 income cutoff but are not fully creditworthy to IDA is financed by its own resources and by H borrow from IBRD, such as small island donor governments, which come together every economies. three years to decide on the amount of new IDA recipient countries face complex resources required to fund IDA's future lending challenges in striving for progress toward the program and to discuss lending policies and MDGs. Policy priorities include strengthening priorities. Since 2001, senior-level borrower the fight against the spread of communicable representatives also participate in these diseases, including HIV/AIDS; building a healthy replenishment discussions. Thirty-eight investment climate as a prerequisite for private countries are now IDA donors. sector investment; promoting gender equality; Donor contributions historically have been and improving the quality of basic education determined on the basis of countries' relative and poor people's access to it. economic strength and on their commitment to IDA assistance is in the form of highly poor countries; as such the major industrial concessional credits, and since the beginning of nations have been the largest contributors to fiscal 2003 the Association has also introduced an IDA. Donor nations also include developing and expanded use of grants, in line with the transition countries-some of them IBRD arrangement for the 13th Replenishment of IDA borrowers and former IDA borrowers-such as (IDA-13) that governs IDA operations in financial Argentina, Brazil, Hungary, the Republic of years 2003 to 2005. The grants are specifically to Korea, the Russian Federation, and Turkey. IDA's address hardships faced by the poorest and most financial strength is based on the strong and vulnerable IDA countries. On this basis the grants continued support of its donors, as well as on are used to finance operations in the poorest repayments of past credits. (See IDA at and most debt-vulnerable countries and in www.worldbank.org.) countries recently emerging from conflict, and to finance HIV/AIDS programs and natural disaster IDA Commitments reconstruction. IDA commitments in fiscal 2003 totaled $7.3 billion for 141 operations, consisting of $6.1 Figure 3.8 Sources of IDA Funding billion in credits (not including an IDA 0 guarantee of $75 million to Vietnam), and $1.2 12.7 11.7 13.2 - billion in grants. Although below last year's 8 9.6 record high, IDA lending commitments in fiscal 8.4 7.9 2003 still represent the third highest on record and are above the average annual total for the 1. 09 0.9 last five years. DAl FY97-99 IDA12 FYOO-02 DA13FY03-05 The largest share of IDA resources went to Africa, with $3.7 billion for 60 operations, IDA Own Resourcesa b Donor Contributions constituting 51 percent and 43 percent of total D IDA commitments and operations, respectively. a. IDA Own Resources include principal repayments, charges less South Asia followed with $2.1 billion for 29 administrative expenses, and investment income. operations. Among countries, Bangladesh, the > Figure 3.9 IDA's stepped-up Efforts in Democratic Republic of Congo, Ethiopia, India, 297 projects ongoing (comparedthe Social with Sectors 190 a Z and Uganda represent the largest single decade ago) recipients of IDA financing. In fiscal 2003 about 17 percent of total IDA H operational financing came in the form of Number of projects under grants in the following categories: operations implementation H benefiting the poorest countries, $241 million; 300 47 poorest and debt-vulnerable countries, $406 million; postconflict countries, $306 million; l 67 Z HIV/AIDS projects and components, $214 200 38 48 million; and natural disasters reconstruction 30 projects, $65 million. 61 90 Health and social services and law and justice 100 and public administration were the leading 92 93 sectors for IDA support, each receiving $1.4 8 2 9 billion, or 19 percent of the total. ° FY1993 FY1998 FY2003 The most prominent theme of resource commitments in fiscal 2003 was human WaterS Supply and Sanitation development, which accounted for 21 percent SocialH Servicesa . 2 ~~~~~~~~~~~~~~~~~Health,Nutrition, and Population of commitments. Major attention was also paid W Education to social protection and risk management; rural development; public sector governance; and Note: Number of projects under implementation includes projects in both IDA-only and blend countries. IDA commitment value of financial and private sector development. ongoing social sector projects 1993, $10.1 billion; 1998, $14.2 billion; 2003, $14.0 billion. IDA Resources a. Social Services is the sum of Social Development and Social IDA Resources ~~~~~~~~~~~~~~~~~~~~Protection. Fiscal 2003 marked the first year of IDA-1 3, which will fund commitments for fiscal years of a system to measure and monitor the results 2003 through 2005. IDA-13 will provide a total of IDA's assistance across countries and to track of special drawing rights (SDRs) 18 billion the contribution made by IDA programming to (about $24 billion) of concessional resources to country outcomes. IDA-eligible borrowers over the three year TRUST FUNDS period. This amount includes SDR 10 billion (approximately $13 billion) of new donor Trust funds, which are separate from the Bank's contributions; IDA internal resources, including own resources, are financial and administrative repayments of principal from past credits and arrangements with external donors that lead to service charges on the order of SDR 7.3 billion grant funding of high-priority development (about $10 billion); IBRD net income transfers (if needs, such as technical assistance, advisory available) of SDR 0.7 billion; and a small services, debt relief, postconflict transition, and carryover of donor resources from the previous cofinancing. Trust funds help the Bank leverage replenishment. Figure 3.8 shows the sources of its poverty reduction programs by promoting IDA's funding over the last three innovative approaches for projects, forging replenishments. Figure 3.9 shows IDA's partnerships, and expanding the scope of stepped-up efforts in the social sectors. development collaboration. Under IDA-13 arrangements a major Many industrial countries, a few of the initiative was launched to strengthen IDA's larger developing countries, the private sector, focus on results. This included the development and foundations make trust funds available to Table 3.4 Select IBRD Financial Data Figure 3.10 Trust Fund Contributions and X (millions of dollars) Disbursements, Fiscal 1999-2003 (millions of dollars) 5,000 For the fiscal yeara 4 500 C World Bank Group contributions 4,443 Income from loans 5,742 6,861 . External donors' contributions Income from investments 418 734 4,000 Disbursements Borrowing expenses (3,594) (4,903) 3,500 Administrative expenses (882) (876) 3,000 2,719 o Other 1,337 108 2,500 Operating incomeb 3,021 1,924 / cr Allocable net income 3,050 1,831 2,000 1,769 1,500 Loan commitments 11,231 11,452 1,000 _ Loan disbursements 11,921 11,256 500 At fiscal year enda o 1999 2000 2001 2002 2003 zr Cash and liquid investments 26,620 25,056 Loans outstanding 116,240 121,589 for all trust funds are reported on a cash basis. Borrowings outstandingc (103,017) (111,205) Figure 3.10 shows trust fund contributions and Equity (37,918) (32,313) disbursements for fiscal years 1999-2003. Major New Trust Fund Programs a Excerpted from the audited f nancial statements presented in volume Responding to emerging development 2 of this Annual Report. Z b. Excludes FAS133 adjustments challenges, the donor community agreed to c Outstanding borrowings, net of swaps. establish several major new trust fund programs for Bank administration during fiscal 2003. These included the Financial Sector Reform and Strengthening Initiative, the Global the Bank for specific agreed-on purposes. The International Comparison Program, the Global Bank also provides some of its own grant Program to Eradicate Poliomyelitis, and the resources to selected trust funds. Least Developed Countries Fund for Climate Change. Contributions, Disbursements, and Balances The Bank's trust fund portfolio expanded in Donor Consultations and Trust Fund Policy H fiscal 2003. The contributions received from Reforms donors totaled $4.44 billion, an increase of During fiscal 2003 the Bank continued its $1.83 billion, or 70 percent over fiscal 2002, and consultations with trust fund donors on the funds held in trust rose from $5.33 billion to ongoing trust fund policy reforms and launched $6.89 billion (a 30 percent increase). These a new framework for managing consultant figures reflect contributions received on a cash trust funds. The main thrust of these trust basis for all trust funds except HIPC, the Global fund-related reforms is aimed at standardizing Environment Facility (GEF), and the Global Fund trust fund policies and procedures; aligning to Fight AIDS, Tuberculosis, and Malaria trust fund activities with Bank strategies and (GFATM), for which contributions are accounted priorities; improving staff accountability in on an accrual basis (starting in fiscal 2003 for managing trust funds through a trust fund GEF and GFATM). The top 10 donors, shown in learning and accreditation program; enhancing table 3.4, accounted for 79 percent of all the financial controls over trust funds; contributions. improving access to financial reporting; and Disbursements during the year totaled $2.56 simplifying and standardizing audit billion, an increase of $0.63 billion, or 33 arrangements for trust funds. percent over fiscal 2002. The five programs with the largest disbursements were HIPC ($751 COFINANCING million), GEF ($409 million), Afghanistan Reconstruction Trust Fund ($182 million), Cofinancing describes funds committed to Consultative Group on International specific Bank-funded projects by official Agricultural Research ($118 million), and GFATM bilateral and multilateral partners, export credit ($64 million), totaling $1.52 billion, or 60 agencies, and private sources. It enables the percent of total disbursements. Disbursements Bank to leverage its resources with additional Figure 3.11 Cofinancing Funds by Region. Fiscal 2000-03 Figure 3.12 Total Bank Lending vs. Cofinancing. Fiscal 2000-03 (millions of dollars) (billions of dollars)o 4,500 20- 4,000 15 3,500 3,000 10 2,500 2,000 5- 1,500 1,000 -2000 2001 2002 2003 500 _~ j 11 _ _ _ XTX L < | ClmA11 Bank Lending [ Cofinancing 2000 2001 2002 2003 Figure 3.13 Heavily Indebted Poor Countries (HIPC) Debt Relief-Reduced Debt Stock and Improving Debt Service Ratios _ W Africa [=1 Europe and Central Asia [ East Asia and Pacific _ Middle East and North Africa H _ South Asia Region =Z Latin America and Caribbean Percent of dollars 30 90 C Debt service as financing, at concessional terms, to benefit the percent of exports recipient country. In fiscal 2003 IBRD and IDA (left axis) recipientcountry. ~~~~~~~~~~~~$62 W Debt service as- financing was supplemented by $3.0 billion 60 percent of revenue r from such sources. Major cofinancing partners 15 (left axis) in fiscal 2003 included the Inter-American \ Debt stock, billions r Development Bank, the Global Environment $127 30 of dollars net t\z Facility, and the European Investment Bank. se present r..: ~ othe decisionvalue point at In fiscal 2003 the largest share of cofinancing 0 _ - 0 (right axis) funds went to the following regions: Latin Before HIPC After HIPC America and the Caribbean ($0.87 billion), (1999) (2002) Africa ($0.85 billion), and East Asia and Pacific Note:Weighted averagesforthe26countriesthat had reachedthe ($0.64 billion). Figure 3.11 shows cofinancing decision pointasofend-March2003 Source: World Bank: Heavily Indebted Poor Countries (HIPC)-Status of funds allocated by region. Implementation, September 28, 2002; Heavily Indebted Poor Countries (HIPC) Initiative-Statistical Update, March 2003 Major Project Cofinancing in Fiscal 2003 A total of 103 projects were cofinanced by the Figure 3.14 Trends in Social Spending before and after Assistance under the HIPC Bank and its partners during fiscal 2003. Initiative Examples of projects with significant cofinancing include (a)the Colombia Social Millions Sector Adjustment Program ($390 million); (b) of dollars Percent the Ghana Health Sector Program Support 10,000 10 Project II ($310 million); (c) the Mexico Rural 9.1% Finance Development Structural Adjustment 9 Loan ($300 million); and (d) the Jordan 8 Si spendIng Education Reform for Knowledge Project ($120 5,000 / milionspofdollars million). Figure 3.12 shows total Bank lending 7 (left axis) and cofinancing for fiscal 2000-03. 6 -4- Social spending, percent of GDP 0 | .59%. (right axis) SPECIAL ASSISTANCE IN FISCAL 2003 Before HIPC After HIPC Accelerated Debt Relief (1999) (2002) Efforts to provide debt relief to the world's Note: Weighted averages for the 26 countries that had reached the decision point as of end-March 2003. poorest and most heavily Indebted countries Source: World Bank: Heavily Indebted Poor Countries (HIPC) Initiative- continued to make good progress in fiscal 2003. Statistical Update, March 2003. As one part of a comprehensive development strategy, the HIPC Initiative is well on the way debt to a manageable level. Twenty-six to achieving its fundamental goal of giving a countries-two-thirds of the eligible HIPC-are fresh start to HIPC by cutting their external now receiving relief that will amount to more z q W~~~~~~ /s W ~~~~~~~~~~-o ~~~- 1pSf S s~~~~~~~~~~~~~~~~~~~~~~S b~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0~~~~~~~~ n ~~. e t, 1 conre tha hav copee th prga ar soninfgr314 tanzania, bilindfoUgna.lceiosoe time. indebto elcoutratges'popo growthesuethateis these chutis eifacentlallige n thegiznHIPCth lo-noecutisdInitiative ioeasoe instruen icmlutdte(a)enouragin conries,n maneigh the thabwlem cofntributednahevingWokhops objctve. whichalrumer conflit-afetd thaohvreachted Figuen orgaizeshow HICollabortio weief.bilateran thecsopoint whioga cmlemitaiiong The plcdoorsri toiaadedress leongre-ndaterm HIssueoeif areb ecuaigcountriesthtnav cmltheditheri periogra are shonitaie will become a3.14.igfetreo prce expediiousl toandmetn theda beenk work Ceeomplsraegientr tohotesueefothat woKing wihallngtes PovertytheduICtIoniStratieg low-income countries now includelassessment incluer (PRS) fnoramewor afuterites cmpletiofn rblmdbsutindebiltedes.Wrsoshvof pointht areconfieve fctdMDsinhavlendbedMs theoec ofganied contcollaborationewithiluableral dcisountpoies while mainaininglng-ther debtc panrtiipteoi thdes pronger-temhavesuen affdecte perforainabliy stadamrdsvingth partiiamewonrk; (b) cotanfblicty,The HICUit expectedis thaltosel certaingnon-Pais ClubPofficia ReductioeSral, g wihthlow-income Countriesnwicunder astressmet commercial, and some small multilateral (LICUS) Initiative to address the special creditors; and (e) continuing to support heavily problems of these countries. The Bank is also _i rn_M a~~~=1-( 8GM 3H1 3AOLJ 3M 1111'LI I H% I IIII~JI tHh[L L.1-ILIf f tA II LII l I I' ' I I t) 'Bti)0 p10CIPI ',I j L11II TLI I 1O It[LIO' '1J L')-t tL[I 0) 11J)f 1I')III I0 LIIIII IS ?/I1II II'!_ \'tt^(>lil'ltl-ltltil l I x111.5-1tXltL -II I ['LIV ftIPI OI.IIII 1 II' PU11LII]l 0 ' I'Id'- flp'1i' ['1A!1['ll-U [IL 1 1 h 1T 1 _ I1l)tI I .lt- 1 I t I I'[' A'l "IIP .I 0ll II 2I''I II ,XI 1 ' )LLI ' I c1!Il'LI Kt L' t' I I IPj . 1.I ) I' I'L' I ,L It''I -LAI2 L IIti'' ''II I dLUITIP I -I 'dtil" -,',I I'" \\ It I .1)q 1 - "'d''L 2H 1iildI'LIp i \L12'LIII 1 '1'0N 11 d. 'LIj'L[ILl' It'.l)l-) t AI i{L' .1L''!'^''[ '1p1-1fJOMl 1"j 111j JLLP _~ ~ ~~~~Q il-fll S,'., \ Lli 1 WIN'1"-' 01 AIII, I9t SJN U01I,I"al^ _1, t [I 1~tI' 1,!111L l.Pt I rI:8Io!ryI o 1'10. 0 r1-,Lij)L. X11 It.vI I I( tt1,'P°JlA I 3 L puno1a" 3D/VtON/H' •925I907 s(JHm*J 7/V"/ 1aN PIJOM 6s2Od eqsinaa z supporting other initiatives, including a particularly those that serve poor people. Transitional Support Strategy in Burundi; PRSCs have been approved this year for country reengagement strategies in both the Burkina Faso, Ghana, Guyana, Sri Lanka, Central African Republic and Sudan; postconflict Tanzania, Uganda, and Vietnam. Continued o funds in the Republic of Congo; and the dialogue with representatives from PRSP Somalia Aid Coordination Body. countries, development partners, and civil Countries eligible for HIPC debt relief must society organizations reinforces the importance prepare Interim Poverty Reduction Strategy of adapting PRSP processes to specific country Papers (I-PRSPs) to reach completion points. The circumstances, setting realistic priorities and PRSP provides a nationally owned framework targets in country-owned PRSPs, and within which savings from debt relief can be supporting their implementation through o redirected to support programs for reducing improved harmonization of donor policies. UZ poverty. These programs reflect locally N14 established priorities prepared on the basis of a Afghanistan _ broad consultative process that incorporates the The $108 million Emergency Transport H views of country stakeholders, including civil Rehabilitation Project financed by an IDA credit society organizations. The PRSP process, with its will help remove transportation bottlenecks and emphasis on pro-poor growth, long-term promote rehabilitation of the country's highway poverty reduction, and working toward and aviation networks. The fiscal 2002 $42 achieving the MDGs, has extended beyond million Emergency Public Works and Community countries eligible for the HIPC Initiative to cover Empowerment Project provided for the a wider group of countries that receive IDA rehabilitation of the Salang Tunnel. The tunnel financing. For those countries, Bank CASs are covers a critical section of the highway now normally expected to be based on connecting the city of Kabul to eight provinces country-owned PRSPs. and is Kabul's only entry point for humanitarian aid and other goods and for refugees returning Poverty Reduction Support Credits from the north. The PRSP approach enables development strategy and development assistance to be Iraq grounded in a broad-based, participatory, and In line with Development Committee discussions country-owned process. PRSCs are designed to in April 2003, the Bank's Board authorized its support this process in countries with good management to undertake a needs assessment policies and sound public institutions. PRSCs for Iraq, including dispatching fact-finding provide customized support to missions to Iraq to assess rebuilding needs. The country-developed and country-owned reform Bank is assessing the most pressing needs for programs after extensive consultations among the country's reconstruction, working with the stakeholders. They focus on building United Nations, the Islamic Development Bank, government capacity and institutions, and the European Union, among others. * ... 4. IMPROVING DEVELOPMENT EFFECTIVENESS The charts and maps in this section show progress toward the Millennium Development Goals (MDGs) based on present trends. They represent an assessment of where countries and regions now stand and not a prediction of final outcome. H z T_he world in which development we need to examine results throughout the organizations work has changed. The new development cycle: early on, for strategic T era of global interconnected-ness and planning and program design; during the life of deeper concern for global stability and the project, for day-to-day management and prosperity requires development efforts that go corrections to strategy; and toward the end, for beyond process to achieve results through ex post evaluation and feedback for future measurable out-comes. Such outcomes include work. The Bank's action plan includes these greater numbers of families lifted out of components: building country capacity to focus poverty, higher levels of education reached by on results in policy and management decisions, adults, and lowered infant mortality rates. including results-based monitoring and Countries need to focus on results so that they evaluation; fine-tuning Bank incentives, can make better policy decisions and design instruments, and procedures, and strengthening better strategies for country-led development. the Bank's capacity to focus on results; and The new partnership for development that promoting a global partnership on managing emerged from the Monterrey, Johannesburg, for results to enhance impact through collective and Doha summits emphasizes results in order action. to accelerate and monitor progress toward achieving the Millennium Development Goals Building Country Capacity (MDGs). The World Bank's results agenda is an Ultimately they are the countries that achieve action plan to enhance the Bank's effectiveness results, with support from development as a development agency. It involves several agencies and other partners. But many components: setting clear objectives, countries lack appropriate monitoring and establishing indicators that can be monitored, evaluation systems to enable policy-makers to linking activities with intended results, and track progress toward results; demonstrate the using that information in making management outcomes and effects of a given policy, decisions. program, or project; and feed these findings back into policy decisions. In many countries the THE RESULTS AGENDA basic statistics to assess changes in such core areas as poverty, health, and education during a The Bank's agenda for results is based on the three-to-five-year period of a Poverty simple idea that results can be improved by Reduction Strategy Paper (PRSP) are weak or increasing management attention to them. This missing. The Bank's action plan focuses first on approach proved successful in recent years with fostering countries' demand to measure and respect to quality. In the mid-1990s the Bank monitor results, and on building their capacity began to track the quality of its loan approvals to derive and use results information. This can and analytical work. This has led to progressive be achieved by strengthening the results focus improvements in the quality of products and of PRSPs in low-income countries; services to contribute to improvements in strengthening public sector focus on results country outcomes. This agenda recognizes that through public sector management programs; z and supporting improved national statistical working with other multilateral development systems through a simplified lending program banks to harmonize policy, procedures, and for statistical capacity building. standardized bidding documents. In this area, Bank management is in consultations with o Tracking Progress toward Results donors, borrowers, the industry, and civil society It is not enough to have well-designed projects on a proposal for modifications to the Bank's that achieve their objectives-the objectives procurement guidelines to be submitted for must contribute to growth, social welfare, and Board approval. The revised guidelines will poverty reduction at the country level. The enable the Bank to move toward use of Bank's strategies and instruments will need to electronic procurement systems support to z reflect the shift from focusing solely on simplify procedures and harmonize policies. In project-level results to measuring country-level addition to the higher thresholds already results. This will include strengthening the focus implemented for delegation to field offices, on outcomes; incorporating a clearer definition prior review of borrowers' actions, and of country outcomes and how the Bank's increased use of national competitive bidding, program contributes to them in Country this effort will help lower transaction costs for Assistance Strategies (CASs), sector strategies, partner countries. Country Procurement investment lending, and policy-based lending; Assessment Reports and Country Financial and simplifying the required documents and Accountability Assessments are now economic processes. It also calls for an integrated and sector work products. architecture that allows better tracking of progress through measurable indicators at the Forming Partnerships for Better Results project, country, sector, and global levels. Getting better results at the country level Keeping track of progress toward results is requires the collaborative action of a important in helping the borrowers achieve community of practitioners among agencies and z results, managing the Bank's work, and countries. One of the key challenges for the demonstrating the effectiveness of efforts. A Bank and its partners is to coordinate number of improvements are planned that will international results reporting so that a core set incorporate systematic assessment of results of country outcome indicators is aligned with - into Bank review processes, including the PRSP priorities and linked to the MDGs. Another annual portfolio review process (see the challenge is to identify country-level data gaps o discussion of the Bank's Quality Assurance and offer coordinated support to address Group), the IDA measurement system, and the statistical capacity building in countries. strategy and budget processes. Within the Bank the results agenda is an evolutionary process. Many Bank units have Simplifying Policies and Procedures already achieved progress. For example, a To enhance its contribution to country results, revised PRSP Sourcebook (published in two the Bank worked this year in three areas to volumes as A Sourcebook for Poverty Reduction simplify and modernize its internal policies and Strategies) for use by client countries contains procedures (which, at the same time, will strengthened chapters on setting targets, complement its harmonization agenda). In the monitoring and evaluation, and the role of civil area of financial management, it developed society in tracking progress. More public sector major changes to its audit policies, agreed with analytical work and loans are addressing the donors on harmonized processes for financial use of results-based monitoring and evaluation reporting and auditing, and began a review of as a tool for better management. A number of the rules on eligibility of expenditures. country teams, such as those in Cameroon and In the area of lending policy and procedures, Ukraine, are pilot-testing the results-based the Bank undertook extensive consultations on CASs. The Bank has developed a new lending the proposed update of the Bank's operational application-Stat Cap-to encourage a multi policy on adjustment lending and the donor approach to building statistical capacity procedures for approving retroactive extensions on the basis of a statistical master plan. Ukraine of closing dates; established streamlined is the first country to use this application. procedures for additional financing (repeater Additional funding is now available for other projects) and simple, low-risk projects; countries and country teams interested in the completed simplified and modernized program. (See "data" in "About Us" at templates and guidelines for the main www.worldbank.org.) investment lending documents; and activated a The results agenda is aimed at producing hotline to help staff quickly resolve operational more effective outcomes and adding to the issues. progress already made toward the MDGs. In the area of procurement, the Bank is TODAY-'-'S GEIEAT BUILDER Art, Science and Technology merge in our work, with highest levels of quality assurance, reliability in performance, completion of projects on time and to budget, constantly ranking high on the world list of the Top International Contractors. A EUROPEAN PERSPECTIVE ;, 11 ,.. .a ... - -- , ' *' -: gS ; , ^,. , e^i - * ',6bl .v, 1_.,~~~~~~~~~~~~~~~~~P- ALLAMA I 2DBAL INT. AIRPORT. LAHORE. PAKISTAN LIMASSOL - PAPHOS HIGHWAY. CYPRUS DOHA INTERCONTINENTAL HOTEL. QATAR WORKS ON RIO ANTIRRIO BRIDGE, GREECE BUILDING TODAY THE WORLD ~. \_J OF TOMORROW iw Joannou & Paraskevaides Group Building & Civil Engineering Contractors 1, Byron Avenue. P.O.Box 21178, CY-1503 Nicosia, Cyprus,Tel: +357 22 868600, Fax: +357 22 818868. Also offices in: London, Athens, Dubai, Riyadh, Doha, Muscat, Karachi, Addis Ababa,Tripoli Libya, Cairo. Damascus H MALNUTRITION PREVALENCE z Figure 4.1 CHILD MALNUTRITION GOAL 1: ERADICATE EXTREME POVERTY AND HUNGER Reaching the MDG7 TARGET: Halve, between 1990 and 2015, the 0 Likely z O~~~~~~~~~~~~~~0Possible proportion of people who suffer from hunger @ Unlikely INDICATOR: Malnutrition prevalence (percent of * Very unlikely No data children less than five years old) IBRD 32598 PRIMARY SCHOOL COMPLETION Figure 4.2 PRIMARY SCHOOL COMPLETION - , . GOAL 2: . _t ACHIEVE UNIVERSAL PRIMARY EDUCATION . 'ue TARGET: Ensure that, by 2015, children Reaching the MDG? * . everywhere, boys and girls alike, will be able to 0 Likely 0 Possible complete a full course of primary schooling 1 Unlikely TT Z INDICATOR: Primary completion rate, total * Very unlikely (percent) 'No data IBRD 32595 Universal Primary Education THE CHALLENGE OF ACHIEVING THE Figure 4.2 shows progress toward universal MILLENNIUM DEVELOPMENT GOALS primary education, measured by primary school completion rates: the proportion of children The MDGs commit the international community successfully completing the last year of primary to an expanded vision of development, one school. Three regions-East Asia and Pacific, that vigorously promotes human development Europe and Central Asia, and Latin America and as the key to sustaining social and economic the Caribbean-are close to being on track for progress in all countries, and recognizes the achieving the goal of universal primary importance of creating a global partnership for education. But three more regions, with 150 development. For the World Bank, the MDGs million primary-school-age children, are in present both opportunities and challenges-to danger of falling short. Sub-Saharan Africa lags rise to a higher level of operational farthest behind, with little progress made since effectiveness and to deliver higher quality 1990. South Asia has had chronically low products and services to our clients. enrollment and completion rates, and the Middle East and North Africa has made little Poverty and Hunger progress since 1990, although a few countries in The first of the MDGs calls for cutting the both regions have made large gains. Removing proportion of people living in extreme poverty impediments and reducing costs can help boost and those suffering from hunger to half the enrollments. 1990 level by 2015. Children experience malnutrition when they consume too little food Gender Equality energy to meet the body's needs. Adding to the Gender disparities exist everywhere in the problem are diets that lack essential nutrients, world. Women are underrepresented in local illnesses that deplete those nutrients, and and national decision making bodies. They earn undernourished mothers who give birth to less than men and are less likely to participate underweight children. Regional trends show in paid employment. And in many low-income high malnutrition rates in South Asia and rising countries girls are less likely to attend school. rates in Sub-Saharan Africa. Many countries in All regions, except Latin America and the these regions may have difficulty achieving the Caribbean, are still short of the target, which is target based on current trends. (See figure 4.1.) set for 2005. (See figure 4.3.) The differences between boys' and girls' schooling are greatest GENDER Figure 4.3 GENDER EQUALITY IN EDUCATION . .- . r ' GOAL 3: . Z PROMOTE GENDER EQUALITY AND EMPOWER -_ WOMEN 4w$; TARGET: Eliminate gender disparity in primary and Reaching the MDG? . -r secondary education, preferably by 2005, and at all 0 Likly - I levels of education no later than 2015 .-: Unlikely , C INDICATOR: Ratio of girls to boys in primary and *Very unlikely No data secondary education IBR_32561 CHILD MORTALITY z . - - v,fc..t Figure 4.4 CHILD MORTALITY Z, GOAL 4: REDUCE CHILD MORTALITY Reaching the MDG? 4t .? TARGET: Reduce by two-thirds, between 1990 and 0Q PossibleLikly 2015, the under-five mortality rate - Unlikely INDICATOR: Mortality rate, less than five years old * Very unlikely i (per 1,000 live births) - No data 11IRD32599 in regions with the lowest primary school countries have made the greatest improvement, completion rates and lowest average incomes. reducing average mortality rates by 36 percent. In Sub-Saharan Africa the ratio of girls' to boys' But even this falls short of the rate needed to enrollments in primary and secondary school reach the target. has barely changed since 1990. In 1998 it stood at 80 percent. Progress has been greater in Maternal Health South Asia, but girls' enrollments reached only To reduce maternal mortality rates women need 78 percent of those of boys in1998. access to modern health services. The share of births attended by skilled health staff provides Child Mortality a good index of where the need is greatest. Rapid improvements before 1990 gave hope Only 58 percent of women in developing that mortality rates for children under five countries give birth with the assistance of a could be cut by two-thirds in the following 25 trained midwife or doctor. In Latin America, years. But progress slowed almost everywhere where the share of births attended by skilled in the 1990s. And no region, except possibly health personnel is high, maternal mortality is Latin America and the Caribbean, is on track to relatively low. And many countries in Europe achieve that target. (See figure 4.4.) Progress and Central Asia and in the Middle East and has been particularly slow in Sub-Saharan North Africa appear to be making progress fast Africa, where civil disturbances and the human enough to achieve the target. But in Africa, immunodeficiency virus/acquired immune where skilled attendants and health facilities deficiency syndrome (HIWAIDS) epidemic have are not readily available, maternal mortality is driven up child mortality rates in several very high and progress toward the target is countries. In 2001 the average under-five slow. (See figure 4.5.) mortality rate was 121 deaths per 1,000 live births in low-income countries, 41 in HIV/AIDS lower-middle-income countries, and 27 in In Africa the spread of HIV/AIDS has reversed upper-middle-income countries. In decades of improvements in life expectancy and high-income countries the rate was less than 7. left millions of children orphaned. It is draining Improvements in infant and child mortality the supply of teachers and eroding the quality have come slowly in low-income countries, of education. In 2002, 42 million people, where mortality rates have fallen by only 12 including 3.2 million children, were living with percent since 1990. Upper-middle-income HIV/AIDS-more than 95 percent of them in H BIRTHS ATTENDED BY SKILLED PERSONNEL Figure 4.5 MATERNAL MORTALITY GOAL 5: ij- IMPROVE MATERNAL HEALTH Reaching the MDG7 TARGET: Reduce by three-quarters the maternal ) Likely Z, ~~~~~~~~~~~~~Possible mortality ratio, between 1990 and 2015 0 Unlikely INDICATOR: Births attended by health staff * Very unlikely (percent of total) No data IBRD32594 HIV/AIDS PREVALENCE Figure 4.6 HIV/AIDS PREVALENCE . GOAL 6: .t, COMBAT HIV/AIDS, MALARIA, AND OTHER DISEASES *8.00% or more TARGET: Have halted and begun to reverse the S 00-7.99% :Z spread of HIV/AIDS by 2015 05. 0-.99%- INDICATOR: Prevalence of HIV, total (percent of Less than 0.50% population ages 15-49) No data IBRD32593 developing countries and 70 percent in - Sub-Saharan Africa. There were almost BOX 4.1 CASE STUDY: EDUCATION FOR ALL a million new cases in South and East Worldwide, 115 million children do not attend primary school. Asia, where more than 7 million people Education isthebackboneofsocietyandthefoundationforastrong are now living with HIWAIDS. Current economy. How can countries achieve universal primary education projections suggest that, by 2010, 45 and reach the international goal of Education for All (EFA) by 2015? - ' ' Twenty case studies from Brazil, Guinea, India, and Uganda illustrate million more people in low- and key factors for accelerating progress toward EFA. Guinea's _ middle-income countries will become experience shows that EFA success can be achieved through infected unless the world mounts an sustained, s Ry-elltfl IiLi IHicIN; Tl - W l:;qq circumstances. Uganda highlights how important it is to have effective campaign to halt the disease's political commitment and flexible donor support. Brazil's experience spread. (See figure 4.6.) demonstrates that a country can reach the 10-15 percent of the out-of-school population through a concerted focus on equity and Environmental Sustainability quality. India shows that achieving such EFA goals as equity and An improved water source is any form quality is possible even in a very large country. Moreover, India underscores the importance of country-specific solutions, donor of water collection or piping used to flexibility, and country ownership. make water regularly available. It is not After reviewing these country case studies the Bank found several the same as "safe water," but there is elements necessary for achieving EFA: no practical nomeasurepractical of whether water * ~~~~strategyStrong political commitment, sound policy, and an effective supplies are safe. Connecting all e Concerted efforts to mobilize and efficiently use domestic households to a reliable source of water resources that is reasonably protected from * Focus on results, which means addressing the inequitable contamination would be an important distribution of educational opportunities. Poor people, rural dwellers, girls, indigenous groups, and disabled people often step toward improving health and have less access to high-quality education reducing the time spent collecting e Emphasis on the school and the classroom as essential water. In 2000,1.2 billion people still components for educational change, along with more attention lacked access to an improved water to middle managers in the educational system. source, 40 percent of them in East Asia Initiative to accelerate progress toward EFA goals. The Fast-Track and the Pacific region and 25 percent in Initiative has already led to many positive developments: intensified Sub-Saharan Africa. Meeting the MDGs collaboration among the World Bank and various United Nations will require providing about 1.5 billion (U.N.) agencies; renewed interest among international witho accesssafe waternon-governmental organizations and civil society organizations in people with access to safe water universal primary education; and a greater focus on the between 2000 and 2015. Although development agenda and policy debate in fast-track countries. ACCESS TO WATER . r , .~~- r- . - A z Figure 4.7 IMPROVED WATER SOURCE .v GOAL 7: UA L R h t . . t ENSURE ENVIRONMENTAL SUSTAINABILITY Reaching the MDG? TARGET: Halve the proportion of people without Likely i - - QPossible sustainable access to safe drinking water by 2015 Q Unlikely W INDICATOR: Improved water source (percent of 0 Very unlikely . population without access) C No data ' -I0 32597 z Percent of gross national income 0.7 0.6 Germany -United States Japan -- Average for all DAC countries 0 S United Kingdom ---- UN target = 0.7% 0.4 z Figure 4.8 NET OFFICIAL DEVELOPMENT ASSISTANCE 0.3 GOAL 8: . DEVELOP A GLOBAL PARTNERSHIP FOR DEVELOPMENT 0.2 TARGET: Further develop an open, rule-based, predictable, 0.1 nondiscriminatory trading and financial system INDICATOR: Net 0.0 ODA as percentage of OECD/DAC donors' gross national income 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 many countries in South Asia appear to be on track to achieve the goal, the Middle East and BOX 4.2 CASE STUDY: FIGHTING North Africa-with water a scarce resource- HIV/AIDS, TUBERCULOSIS, AND will struggle. (See figure 4.7.) MALARIA Global Partnership HIV/AIDS, tuberculosis (TB), and malaria pose serious challenges to the developing world. In 2001 malaria Goal eight complements the first seven. It caused 1 million deaths, TB nearly 2 million, and AIDS commits wealthy countries to work with 3million, of which 2.2 million were in Sub-Saharan developing countries to create an environment Africa. These deadly diseases touch all segments of the in which rapid, sustainable development is economy and society, leaving children without parents possible It calls for an open, rule-based trading and countries without their most productive workers. possiblefi . . The international community has made combating these and financial system, more generous aid to diseases an urgent priority. countries committed to poverty reduction, and Bank case studies in Brazil, China, Tanzania, and Uganda relief for the debt problems of developing demonstrate that developing countries can effectively countries. Aid is most effective in reducing fight against these seemingly intractable diseases. In ---- poverty when it goes to poor countries with Brazil, for example, the adult rate of prevalence for good economic policies and sound governance. HIV/AIDS has been contained at less than 1 percent. In good levels have been falling, both in comparison China malaria has declined from 30 million cases in 1950 Aid levels have been falling, both In comparison to 20,000 cases in 2000. with the size of donor country economies and A country needs four key elements to confront these in nominal terms. (See figure 4.8.) To help the diseases successfully: poorest countries reach the MDGs, official 1. Sound public policies development assistance will need to double 2. Strong health care capacity from its current level of $52 billion a year. - 3. Adequate financing 4. Effective monitoring and evaluation of results. The foundation for these key elements is strong Case Studies national leadership. Development assistance can play a During fiscal 2003 the Bank conducted case vital role in these efforts by shaping better policies, studies in a number of countries to examine building national capacity, injecting more financial progress on three important initiatives: resources, and strengthening the focus on results. Education for All, HIV/AIDS programs, and Development assistance already has made a difference waterin rural delivery communities. The results in achieving success. If we are to save millions of lives- water delmariver infrural communitieso Theresultachieve. the MDG of reversing AIDS, TB, and malaria are summarized from box 4.1 to box 4.3. - epidemics by 2015-the international community must continue to devote significant resources to this battle. T H E W 0 R L D A N K P E R S P E C T IV E S 0 N D E X' E L0 PM EN T a) - 3cc cc zF -a -0 > -0n0 :--0r- r'0 :300)MME- CD La (D (D :3 00:33 i'- :3 0 t, 0rD 0, rD ccu 3 PrD 'a n -0':3 m- ID lac (Dm-0)---o IICL=3crD3a, CDz30- c(D :3n-0 rD -, C-a) :n 3:3 to-ai,-0< rD_OQ,E-D_ C-07-mmm 3:3 (D<0 Zr 0(D rq S-m3wDrD ~ : Ot S ;~~~~~~~~~ _ s~rt - ___ i n a_ .N n_~~ as m i i 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~96 )JLaJ3Jl 1B IO 5. AFRICA frica has continued to register progress AFRICA FAST FACTS A in many areas. Sixteen countries - averaged greater than 4 percent growth Total population: 0.7 billion over the last decade. Investment and trade Population growth: 2.2% Life expectancy at birth: 46 years trends have been steady. Net foreign direct Infant mortality per 1,000 births: 105 investment (FDI) to Africa rose to $6.8 billion in Female youth illiteracy: 27% 2001 but was heavily concentrated in 2002 GNI per capita: $450 Number of people living with HIVWAIDS: 28.5 oil-exporting countries and South Africa. Africa million had the highest returns on FDI of any region in the world, and the flow of workers' remittances Note: Life expectancy at birth, infant mortality rate per 1,000 births, and female youth illiteracy are for back to the continent doubled in only two 2001, other indicators are for 2002, from the World years, reaching $4 billion in calendar year 2002. Development Indicators database. The term gross Access to new information technologies is national income (GNI) is now used instead of gross expanding by about 10 percent annually, with national product (GNP). Internet use rising sharply. Air transportation Total FY03 Total FY03 has been a high-growth sector, with 31.8 Disbursements New Commitments IBRD $54.8 million IBRD $15 million million passengers recorded-a 9 percent IDA $3,226.2 million IDA $3,722.2 million annual increase during years preceding the terrorist attacks of September 11, 2001. Portfolio of projects under implementation as of June Illiteracy has continued to decline, from 50 30, 2003: $15.9 billion percent in 1990 to 37 percent in 2001. The continent's leaders have made progress in Africa, that would represent an increase of resolving major conflicts in the region (Angola, about 50 percent in ODA and would restore the Democratic Republic of Congo [DRC], the flows to about the levels of the early 1990s. Republic of Congo, and Sierra Leone). More countries are also managing peaceful political WORLD BANK ASSISTANCE transitions (Ghana, Kenya, Mali, and Senegal). The continent, however, continues to face The World Bank, the largest provider of enormous development challenges. Half the development assistance to Africa, seeks to population lives on less than $1 a day. Half lack accelerate progress toward attaining the access to safe water. Only about one in four Millennium Development Goals (MDGs) in poor rural girls attends primary school. Largely Africa. The Bank's strategic objective is because of the HIV/AIDS pandemic (with about consistent with objectives outlined by African 30 million Africans currently afflicted), health heads of state in the New Partnership for and nutrition indicators are moving in the Africa's Development (NEPAD) Initiative and is wrong direction. Conflict still exacts a huge toll based on the analysis of the study titled Can on politically fragile states. Overall gross Africa Claim the 21st Century? Indeed, at the domestic product growth is barely 3 percent, request of NEPAD the World Bank agreed to roughly in line with population. support the pan-African initiative in a number Addressing these challenges requires of specific areas: infrastructure, agriculture, adequate resources, and development partners regional trade facilitation, health, nutrition, have pledged to make such resources available. population, education, community-driven Official development assistance (ODA) could development, and capital flows. increase by some $12 billion annually if the IBRD commitments in fiscal 2003 totaled $15 commitments made at the Monterrey Summit in million for 1 project. IDA commitments for fiscal 2002 are met. If half of this increase goes to 2003 add up to $3.7 billion in support of 60 z AFRICA-COUNTRIES ELIGIBLE FOR HIV/AIDS. The Bank administers the Multidonor WORLD BANK BORROWING Trust Fund for Demobilization and Reintegration for the Great Lakes region, set up Angola to provide a comprehensive framework for C Botaenin disarmament, demobilization, and reintegration Burkina Faso efforts in the subregional area. Burundi The Bank is focusing on better management Cameroon of revenues from natural resources (which help Cape Verde Central African Republic finance African conflicts). It has launched an z Chad initiative that aims to promote international Comoros policy measures to improve transparency of Congo, Democratic Republic of Congo, Republic of revenues from commodity exports (oil and gas) C6te d'lvoire and reduce rents from illegal trade of > Equatorial Guinea commodities linked to conflict (diamonds, ~~~~~~Eritrea. H Ethiopia precious metals, and timber). Gabon To help clients better capture and integrate The Gambia issues of anticorruption into poverty-alleviation Ghana efforts the Bank strengthened its operational Guinea-Bissau programs in capacity building, governance, and Kenya public sector management. Its strategy is Liberia detailed in Reforming Public Institutions and Madagascar Strengthening Governance. Malawi Z Mali Mauritania DEVELOPING HUMAN RESOURCES Mauritius Mozambique Developing human capital is key to reducing Namibga poverty through better access to education and CZ Nigeria health services and through social protection Rwanda interventions to help vulnerable groups. In Sao Tome and Principe fiscal 2003 over 21 percent ($811 million) of the Senegal Seychelles Bank's commitments in Africa were for human Sierra Leone development. Communicable diseases, notably H Somalia HIV/AIDS, pose critical challenges for Africa's H ~~~~South Africa Sudan development. The Bank has approved $1 billion Swaziland over time to fight HIV/AIDS in Africa and Tanzania remains the region's leading financier of Uganda HIV/AIDS programs. Through the Multi-country Zambia HIV/AIDS Program for Africa, $600 million has Zimbabwe been committed by 20 countries. This program has approved 18 projects, of which 15 are projects and 10 supplemental credits. The already effective. Other health, nutrition, and increase in recent years is expected to be population programs involved 47 projects in 30 sustained in the coming years, with the countries. (See box 5.1.) objective of 50 percent of IDA resources being The Bank is actively involved in 41 education directed to Africa. projects in the region, particularly focusing on primary education and on countries with low IMPROVINGGOERNANCE AND enrollments. Commitments in fiscal 2003 were IMPROVING GOVERNANCE AND $423.6 million. Education for All has emerged as RESOLVING CONFLICT an important priority, especially for girls, not The Bank increased support to African countries only because of its implications for productivity emerging from conflict by developing an but also because of its strong links to other operational agenda to better tackle postconflict social goals, such as reducing maternal and issues. Currently there are 95 projects under child mortality. implementation in conflict-affected countries in There is an urgent need for African countries Africa. The DRC received the first IDA grant to strengthen their tertiary education systems ($50 million) to help stabilize the economy and to help them better respond to the needs of contribute to addressing such pressing issues as their economies. The Bank is actively supporting H- - . K~~~~~~~~~~~~~~~~~~~~~ CUEINCIDENT isat the forefront of real-time surveillance management of high-value assets. EN We are the antidote to uneasiness and insecurity, and provide the insights you wish you hadCU I ID N the day before the morning after. Phone us on (0 11) 331 21 00 or visit www.cueiincident.com SU RVE I LLANCE TECH NOLOGY CITI ES ROA DS RAI LWAYS HARBO UR S AIRPO RTS WORLD CLASS LEADERS IN THE DESIGN, IMPLEMENTATION AND OPERATIONS MANAGEMENT OF MACRO SYSTEMS. FORMERLY KNOWN AS BAC SURVEILLANCE TECHNOLOGY. SOUTH 4S RE__ z BOX 5.1 HIV/AIDS IN AFRICA BOX 5.2 AMIeW'TAI;If 1A tl]lKII ;MIr * HIV/AIDS has infected more than 50 million The African Virtual University (AVU) is a first-of-its-kind O Africans since the start of the epidemic. interactive-instructional telecommunications network * Nine African countries have more than 1 million established to serve the countries of Africa. The Bank is people living with HIV/AIDS. The 21 countries with its largest supporter, with commitments of $13 million > the highest infection rates on earth are all in over three years. The AVU leverages the power of mod- Sub-Saharan Africa. It is most worrisome that, among ern telecommunications technology to provide 15-24-year-olds, 9 percent of women and 4.3 percent of 7.71*1011 S l T z men are infected. This reveals the profound gender students and professionals in Africa. With more than 50 O dynamics of the epidemic and foretells continued percent of its 700 million people under 20 years of age, spread in the next generation. several factors drive the demand for such education at * Demographic impact: Life expectancy has fallen the tertiary level in Africa: by more than a decade in many countries and is now * Limited places in universities for the graduates of probably less than 40 years in the hardest-hit countries. high schools Mortality has already doubled among working-age * Overstretched government budgets adults in many countries and will continue to rise. * Expensive and oversubscribed private education * Development impact: Teacher deaths have dou- at the tertiary level bled in Zambia and tripled in Kenya. Last year nearly 1 * A large labor force that requires the upgrading million African pupils lost a teacher to the epidemic. of skills AIDS has greatly aggravated the impact of this year's * The growing isolation of Africa from *IE.' drought. Because of AIDS, South Africa's economy could knowledge. be 17 percent smaller in 2010, with major implications AVU has been transformed from being a project of the for trading partners across the continent. AIDS is proba- World Bank to being an independent, intergovernmen- bly already costing Africa 1 percent of per capita growth tal organization based in Nairobi, Kenya, with 34 learn- z a year. The forecast of 20+ million orphans by 2010 will ing centers in 17 African countries. pose an unprecedented social welfare challenge. As To date, AVU has accomplished the following tasks: AIDS impoverishes millions of people, the poor are more * Created a network of partner institutions in fran- likely to be forced into jobs or situations that put them cophone, anglophone, and lusophone African countries _ at enhanced risk for HIV, thus driving a vicious circle. with learning centers hosted mainly in public universi- C MDGs challenge: Africa has no chance of achiev- ties ing a majority of the MDGs until HIV/AIDS is overcome. * Launched an accredited degree and diploma in The epidemic is already pushing Africa in the wrong computer science direction on several of the goals and is slowing progress * Registered more than 23,000 students in its toward others. semester-long courses H * Promise of renewed partnership: The last three * Enrolled close to 2,500 professionals in executive years have brought unprecedented improvement in business seminars donor collaboration on HIV/AIDS-at both country and * Delivered in excess of 3,000 hours of instruction- global levels. Recent all-donor joint reviews led by gov- al programs, based on materials from leading universi- ernment are a promising model for country-led, harmo- ties in Africa, Australia, Europe, and North America nized program support. * Provided 1,000 personal computers to learning Note: Data in this box are as of December 31, 2002. centers * Set up a network of 45,000 e-mail account hold- this effort and is now financing some aspects of ers and adigital library of more than 1,000 journals tertiary education in approximately 20 African * Achieved greater than 40 percent participation countries. (See box 5.2.) of women in AVU's pre-university courses at the most Another focal area is the interaction active learning centers. between HIV/AIDS and education. HIV/AIDS has The AVU plans to expand coverage across Africa over devastating effects on education systems, the next five years and to partner with NEPAD to especially in high-prevalence countries, for enhance human capacity for sustainable development. example, through the sharply increased mortality and absenteeism of teachers. These infection. Unfortunately the pandemic has led effects are not well understood and generally to an alarming increase in orphans-a are not addressed. At the same time, in most population projected to grow from about 13 countries education is not yet playing the million to perhaps 35 million children in 2010. effective role it should play in promoting Several major studies are being carried out to behavioral change to prevent HIV/AIDS develop "good practice" guidelines for (a) c~~ -. ^ *-~~N. - , - -. * ears~~~~~~~~~~~~~~~~~~~~~~o j~~~~ -t - 20 years in existence, ten years ofdemocracy,l tdie tide has turned. xv xv. d b s a. r g | ... ".'!2i4' 4 t~~~~~.~ Z Table 5.1 World Bank Lending to Borrowers in Africa, by Theme and Sector, Fiscal 1994-2003 (millions of dollars) 1994-97 1998-99 (annual (annual average) average) 2000 2001 2002 2003 THEME Economic Management 160.7 165.0 78.2 138.5 138.7 37.8 z Public Sector Governance 317.4 291.7 495.3 429.6 851.9 432.4 C Rule of Law 38.2 21.0 26.7 34.0 22.5 34.5 Financial and Private Sector Development 570.6 509.0 466.7 625.8 780.7 383.6 Trade and Integration 146.3 120.5 53.7 261.5 46.4 37.2 K Social Protection and Risk Management 78.5 117.2 140.5 376.4 98.3 543.7 H Social Development, Gender, and Inclusion 140.0 167.6 210.5 491.8 347.4 420.0 Human Development 244.3 267.7 208.5 399.4 739.0 811.4 Urban Development 262.7 253.8 154.9 206.1 279.6 425.5 - Rural Development 203.9 393.6 151.8 296.3 329.2 384.1 Environmental and Natural Resource Management 227.9 156.0 172.4 110.0 159.9 227.0 Theme Total 2,390.6 2,463.2 2,159.1 3,369.6 3,793.5 3,737.2 SECTOR Agriculture, Fishing, and Forestry 156.8 170.0 111.5 212.0 210.4 303.4 Law and Justice and Public Administration 532.7 610.9 834.9 880.8 906.9 721.8 Information and Communication 5.8 36.7 17.3 21.1 33.8 41.4 Education 188.3 304.4 189.8 209.5 472.6 423.6 -d Finance 158.8 53.7 121.7 200.1 192.8 67.2 Health and Other Social Services 265.8 273.6 183.1 889.9 616.6 775.9 Industry and Trade 326.8 94.3 104.7 170.6 266.7 92.7 Energy and Mining 243.3 244.0 176.3 198.0 490.3 324.4 Transportation 352.6 533.5 263.9 229.8 491.1 690.5 Water, Sanitation, and Flood Protection 159.8 142.0 155.9 357.8 112.2 296.3 Sector Total 2,390.6 2,463.2 2,159.1 3,369.6 3,793.5 3,737.2 Of which IBRD 66.1 31.2 97.7 0.0 41.8 15.0 Of which IDA 2,324.5 2,432.0 2,061.4 3,369.6 3,751.6 3,722.2 Note Lending is summarized in the 11 main theme categories and 10 main sector categories in the new thematic-sectoral system, which includes E mi 68 themes and 57 sectors. Numbers may not add to totals because of rounding. In fiscal 2003 under phases I and 11of the Multicountry HIV/AIDS Program (MAP) for Afr ca, the Bank approved 5 operations (Guinea, Mozambique, Niger, Rwanda, and Zambia) totaling $172.8 million in new IDA commitments maximizing the role education can play in Program. HIV/AIDS prevention, (b) addressing the Social protection-targeted activities to impact of HIV/AIDS on education systems, and improve or protect human capital, ranging (c) ensuring the provision of basic education from labor market interventions to income to orphans. Furthermore, the Bank is working support and including pension reform-has with the Joint United Nations Programme on been a growing area of attention ($543.7 HIV/AIDS' Inter-Agency Task Team on million or 14.6 percent in fiscal 2003). Social Education to help countries build capacity to funds account for 60 percent of the Africa address these concerns and to develop region's current social protection portfolio, interventions that can be supported under the constituting some of the most promising IDA-financed Multi-country HIV/AIDS programs for community-based development. Figure 5.2 Africa: IBRD and IDA Lending Figure 5.1 Africa: IBRD and IDA Lending by Sector, Fiscal 2003 by Theme, Fiscal 2003 > Share of total of $3.7 billion Share of total of $3.7 billion Water, Sanitation Agriculture, Environmental & Economic Management & Flood Protection Fishing Natural Resource 1% 8% & Forestry 8% Management 6% Public Sector Rural ~~~~~~~~Governance12% -- Law &Justice Developmen /. Rule of Law 1% Transportation 18%&Pbi 0 Administration 1Fnancial &Private 9i% Urban Sector Development Development 10% Information & 11% Energy & Mining - Communication Trade & Integration 9% 1 % 1% Industry & Trade NSocial Protection & Industry &Trade |t ~~~Educationl11%-Finance2/o Human s ,./\= Risk Management 2% Finance 2% Hmn15% Health &Other Development Social Development, Social Services 22% 22% Gender & Inclusion 11% PROMOTING INCREASED GROWTH DEBT REDUCTION AND DEVELOPMENT ASSISTANCE Growth in Africa will require a sound policy and The Bank has continued its efforts to have African institutional climate for investment-both countries fully benefit from debt relief through the domestic and foreign-and a lower cost of doing Heavily Indebted Poor Countries (HIPC) Initiative business, including better infrastructure. Bank and to ensure the effective use of debt relief funding for infrastructure projects in the region resources in alleviating poverty. Under the more than doubled between fiscal 2001 and fiscal initiative, 22 African countries have reached the 2003. The infrastructure strategy is organized decision point (when the amount of debt relief is around (a) providing access to basic services to all; decided and begins to flow), and 5 have reached (b) furnishing a minimum infrastructure platform the completion point (when relief of future debt to render the countries viable for private business, service becomes irrevocable). As of June 30, 2003, investment, and the creation of wealth; and (c) HIPC debt relief for World Bank debt was $2.31 building a "good business address." billion, of which $2.13 billion was for Africa. Debt Regional integration is critical to creating larger service payments to the Bank have been reduced markets to achieve economies of scale, foster by more than 60 percent. The ratio of social competition, and attract foreign investment. The expenditure to government revenue in these Bank has formulated regional integration countries has steadily increased: from 33 percent in assistance strategies for West and Central Africa 1999 to 54 percent in 2002. and is planning such strategies for eastern and Improving resource flows to Africa involves both southern Africa. These strategies support increasing the quantity and improving the quality harmonization of macroeconomic policies, of assistance. Countries (e.g., Tanzania) have moved liberalization of intraregional trade, and toward a new partnership model, with the promotion of regional investment, as well as initiation of a process of independent review of the development of regional projects in infrastructure performances of both donors and the government and the strengthening of regional institutions' against their respective commitments. Country-led capacity. The Bank also supports initiatives aimed CASs are at the center of the agenda adopted in at increasing cooperation to address common fiscal 2003 by the Strategic Partnership for Africa, issues in a regional context, such as the Nile Basin the lead regional forum for aid coordination. IDA Initiative, and measures to prevent transmission of has been moving toward supporting these HIV/AIDS along regional transportation corridors. strategies through program lending. -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C ~~ ~ ~~ ~~ v t lW~~~- -p rt We're more than just a financial capital resource. Over our 62 years of providing competitive loans and equity to Southern Africa's entrepreneurs, we've also developed a sound understanding of what delivers long-term business success. Before finance is approved, ventures are thoroughly investigated by an expert team, so that when we invest, we do so with total confidence and commitment to long-term involvement. In short, we help make viable ideas happen - matching the vision of entrepreneurs with our own, because we believe it takes vision to see vision. If you've got an idea for a new or untested initiative or simply want to expand or improve an existing venture, our resident experts are waiting for your call. Together we can turn your big idea into big business. To discuss funding of RI million or more, just ask the IDC by calling: +27 86 069 3888, e-mail: [email protected] or visit us at: www.idc.co.za IDC Together we can turn big ideas into big business -P.t'i ..nf 'lifte..-- 1:'.1tiff:' Sf l i'/ at' ir[f_ ,&r, O World Bank. Miso Lisanin, 2001 IT7.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ _R_ Z _ ' .F 6. EUROPE AND CENTRAL ASIA z T_he economies of Europe and Central Asia EUROPE AND CENTRAL ASIA FAST turned in solid growth performances during FACTS 2002-4.6 percent for the region overall. Subregional growth varied, with Central and Population growth: 0 1%7> Eastern European countries averaging 2.9 percent Life expectancy at birth: 69 years and Commonwealth of Independent States Infant mortality per 1,000 births: 31 countries averaging 4.7 percent. The Turkish Female youth illiteracy: 1% 2002 GNI per capita: $2,160 economy rebounded from the steep recession of Number of people living with HIV/AIDS: 1.2 2001, registering 7.8 percent growth for 2002. million Eight of the region's economies recorded growth Note: Life expectancy at birth, infant mortality rate in excess of 5 percent; only the Kyrgyz Republic per 1,000 births, and female youth illiteracy are for suffered a setback (0.5 percent decline in gross 2001, other indicators are for 2002, from the World domestic product) as a result of temporary Development Indicators database. The term gross national income (GNI) is now used instead of gross declines in gold and power production. national product (GNP). Notwithstanding the recent tendency of the poorer countries of Europe and Central Asia in Total FY03 Total FY03 New Commitments Disbursements the Commonwealth of Independent States and IBRD $2,089.2 million IBRD $1,893 million South Eastern Europe to grow more quickly than IDA $580.8 million IDA $590.3 million countries in Central and Eastern Europe, vast differenes remCenrai indlEvsels opovery vand Portfolio of projects under implementation as of June differences remain In levels Of poverty and 30, 2003: $15.1 billion human development and in the conditions necessary for sustainable growth. Per capita the financial crisis, the Bank's program income ranges from $10,070 in Slovenia to $200 underscores the structural changes needed for in Tajikistan, and the extent of poverty runs from sustainable growth and macroeconomic stability. more than 50 percent of the population in the poorer countries of the region to low single-digit WORLD BANK ASSISTANCE levels in most countries in Central and Eastern Europe. The World Bank's Europe and Central Asia Given this diversity the Bank's country region operations stress policy reform, assistance programs are being tailored to each institutional development, and the investment subregion, and sector strategies promote needed to underpin sustained growth and subregional cooperation in solving common poverty reduction. Lending during fiscal 2003 problems. The Commonwealth of Independent reached $2.7 billion ($0.6 billion IDA and $2.1 States and South Eastern Europe country billion IBRD), and Global Environment Facility programs, where the challenges of poverty commitments totaled $27.3 million. In advisory reduction are greatest and which account for an services, 81 analytical reports were delivered, increasing share of the Bank's activity in the and 63 technical assistance engagements were Europe and Central Asia region, emphasize undertaken region wide. In addition, the Bank institutional development and subregional presented to the Board Transitional Support cooperation in trade and transportation, Strategies for Kosovo and Serbia and infrastructure, and environment. Programs for Montenegro (formerly, the Federal Republic of European Union accession countries and other Yugoslavia); a Country Assistance Strategy (CAS) middle-income countries increasingly are Progress Report for Bosnia; and Country focusing on knowledge services and knowledge Assistance Strategies for Azerbaijan, the Kyrgyz economy development. In Turkey, which has Republic, Poland, Tajikistan, and Turkey. made considerable progress since the onset of Moreover, the Bank developed CASs for COUNTRIES ELIGIBLE FOR WORLD BOX 6.1 HALF FlULL OR HALF EMPTY? BANK BORROWING: Two recently completed studies underscore both the Albania progress that has been made and the serious Armenia development problems that remain in countries in Azerbaijan Europe and Central Asia. Belarus The 2002 Business Environment and Enterprise Bosnia and Herzegovina Performance Survey (BEEPS) confirmed that there have Bulgaria been significant improvements across the board in the Croatia investment climate since 1999. Also, the "bribe tax" as a Czech Republic share of a firm's revenue is decreasing and corruption is Estonia seen as less of a burden. Poor countries in the z Georgia Commonwealth of Independent States and South Hungary Eastern Europe are failing to provide basic Kazakhstan infrastructure services. And the growth of small and Kyrgyz Republic medium enterprises has been stronger in Central and Latvia Eastern Europe than in the Commonwealth of Lithuania Independent States or South Eastern Europe. Macedonia, former Yugoslav Republic of Another study of 20 countries in Europe and Central Moldova Asia, Achieving the Human Development MDGs in ECA, Poland found that many countries there, particularly IDA Romania countries, are unlikely to meet one or more human Russian Federation development MDGs, and that health-related goals (i.e., Serbia and Montenegro child mortality, maternal mortality, and HIV/AIDS) are of Slovak Republic particular concern. Slovenia Tajikistan structure and performance, for example, by Turkey setting up independent regulatory bodies. To I ~~~~Turkmenistan Ukraine strengthen the effectiveness of the public Uzbekistan sector, the Bank is encouraging citizen z This section also reports on Kosovo, Serbia and ~~~~~~~~~~~~~~~participation,p ttransparency, aand accountability, Montenegro. and helping improve key public sector functions, such as customs, tax administration, Azerbaijan, the Kyrgyz Republic, and Tajikistan and treasury systems. A in the context of completed Poverty Reduction Strategy Papers (PRSPs). EMPOWERING POOR PEOPLE BUILDING THE CLIMATE FOR Although Europe and Central Asia's human INVESTMENT development indicators remain impressive, a systematic assessment found that many of the Recent growth trends suggest that there have region's poorer IDA countries are unlikely to been substantial improvements in the reach key human development Millennium investment environment in the region. Recent Development Goals (MDGs; see box 6.1). This business survey data confirm that businesses situation arises from the deterioration of perceive significant improvements. (See box human development and social assistance 6.1.) Nonetheless, the data also indicate programs as a result of poor program design considerable scope for further improvement. and inadequate financing. The Bank is thus supporting the reform of The Bank's operations in human policies and the development of institutions to development emphasize incentives to expand maintain macroeconomic stability, increase access and increase the quality of health and trade, strengthen public and private sector education services. This is done in part by governance, reduce corruption, enhance the empowering service beneficiaries to demand financial system, and support the physical better access and quality, and by supporting infrastructure underpinning economic provider efforts to meet this demand. production. Empowerment is supported through operations Bank operations address the perverse that promote decentralization, the reform of incentives and weaknesses in institutional financing to link budgets to services provided, capacity that are the root causes of investment the support of inclusive development climate problems. The Bank is providing support programming processes, and the increased use of to identify and change policies that invite community-driven development approaches to "investment-unfriendly" behavior, such as service delivery. On the provider side, operations multiple tariff rates and complicated customs focus on reforms in the public sector to balance procedures; and to improve institutional the roles regarding the provision and financing of PETROLEUM INDUSTRY OF S E R B I A ,r-~~~~~~~~~~-- A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~_W \~ ~~ ~ ~~~~~~~~~~~ ~Pstoe at th her of th Bakas,a w e oo e iestments *.~~~~~~~~~~~~~~~~h West Euoeti' a.Tentoa ! -- ~Opportunities l' f~~~~~~~~~~ Positioned at the heart of the Balkans, at t <>, > ~~~~~~~~~~~~~thecrossroads of the Pan-European traf- ,^ > - 4 ~~~~~~~~~~~ficcorridors, Serbia connects the East to v t ~~~~~~~~~~~~theWest, Europe to Asia. The national j . =- t oil Petroleumcompany Industry- of prise tht diSerbia (NiS) - is the key for entering the as podutiomarket entireof region.the It is the key > i, .s.,,d to the door of new investments. v # % ~~Serbi K s ...... Petroleum Industry of Serbia is the sole Serbian enter- \ ...... j >, prise that disposes of integrated crude oil and natural _a ...... ^ i, gas production, processing and marketing operations. Nd'.s Wilhin the regional framework NIS petrol stations and -_...... - depots make the core of the network supplying fuels ^^...... _~ > to the South East European transport routes. NIS is in charge of natural gas import and transportation, and it is the largest crude oil importer in Serbia. www.nis.yu t iKosice -- - Metropolis in the East of Slovakia r- R~~~~~~~ th preot i.ti. golie im .s ... tiKosice peodtos isa beautifulfr citN'go in cmeial thie eastern corner of Slov akin withi population of 235.500 people. The advantages of its Io(ation domnestic and( initernationial ti'Mnsport routes and( its closeness to borers wit h i Hun-m- Ukraine. MidIPoland tr-anslate, inito ' 4emnnevtiN iii'. 'r[his is sigiiificalltI -tihlancid an - -tg r-ailwa netNvork_ ,itii the inter airportx 3 BtOIOThei og j elthe ceniterit of ecoilnoniN.irtil rC.S loti;I!* F t i - ind- str. and vulture ofthe reion makes the titv thet-Eu ropes VasteilniSiost gate to theti'orhl behind the 'urtr Shengen border. i hi't'prhisnc offive nni nersities has Pw led Kosice to eliomeoi kno as theolcitv ofvt th. The vity 's rivh histor- dates back to the 13t centurv lea Ad beautiful arhitectrllal heritage. ,- TheiSOevious s miitaiosis of histo ind present miakes Kosice a| sevial Place in tllCetalEurope. i%ww.kosivv.s k Figure 6.1 Europe and Central Asia: IBRD and IDA Figure 6.2 Europe and Central Asia: IBRD and IDA Lending by Theme, Fiscal 2003 Share of total of $2.7 billion Lending by Sector, Fiscal 2003 Share of total of $2.7 billion Environmental & Natural Economic Management 1% Resource Management 5% Rural ;4 Public Sector Transportation Water, Sanitation & - Development Governance 12% 1% Flood Protection 2%0/ 7%0/ Energy & Mining ._v> Ureloan / Rule of Law 10%E & M - , r.:ulture, Fishing > Development / 10% / -_., sForestry 13% 8% 1 Industry &Trade itFw .. -L3WL.\ J& Justice l '0% & Human I,Public 20% Private Sector I Developmenta 19 Health &other . / 226% H Social, Services - *. information & SocialI Deve loprr~' 16ommunication- Gender & Inclusion 2% 16% \ -. 9ua Social Protection & Trade & Integration 5% Finance 7% Education 15% Risk Management 11% I primary, secondary, and tertiary services, the Maternal and Child Health modernization of services, the rationalization of Several clients in Europe and Central Asia, staffing, and improved administration. In social including Albania, Armenia, Kosovo, Moldova, protection, Bank operations support the Kazakhstan, the Kyrgyz Republic, Tajikistan, and consolidation of programs to bring them into Turkey, are priority countries for the maternal line with overall fiscal constraints; the and child health MDGs because of deficiencies in realignment of public and private sector roles, their policies or institutions. The Bank is working for example, in pension financing and with these borrowers to help them strengthen provision; improved focus on poor people; and maternal and child health programs. improved incentives to work. Water Supply and Sanitation GLOBAL PRIORITIES The Bank's Europe and Central Asia region has designated a first set of eight countries to be the The Bank's Europe and Central Asia region is focus of an initial set of actions to be taken to focusing activities on a number of global meet the MDGs related to water supply and priorities. sanitation. These countries were selected because their prospects are good for making significant Education for All progress toward meeting the goals over the next Only Albania is currently eligible for the three to five years. Fast-Track Initiative (FTI). The Bank's analysis suggests that eight additional countries may Trade need help in meeting the Education for All Country analytical support was completed or is goal. Current efforts are geared toward underway for Armenia, Azerbaijan, Georgia, the assisting the poorest of these countries, Kyrgyz Republic, Moldova, Russia, and Ukraine, Moldova and Tajikistan, meet criteria for FTI and regional studies were completed for the eligibility. IDA-eligible countries in the Commonwealth of Independent States and for South Eastern Europe. HIV/AIDS To strengthen trade administration and The ECA region has the world's fastest-growing promotion the Bank is implementing lending HIV/AIDS epidemic in proportion to its operations in Armenia and South Eastern Europe. population. In 2002 an estimated 250,000 new infections occurred, bringing to 1.2 million the Investment Climate and Finance number of people living with HIV/AIDS in the Financial Sector Assessment Programs (FSAPs) region. Thirteen countries appear to need have been completed in Bulgaria, Croatia, the priority attention to meet MDGs. Lending Czech Republic, Estonia, Georgia, Hungary, commitments were made to Russia and Ukraine, Latvia, Lithuania, Poland, Slovakia, and Slovenia, work on a project in Belarus was well advanced, and follow-up technical assistance activities are and an IDA grant was made to Moldova. In under way in several of those countries. The Bank addition, the Bank started an ECA HIV/AIDS Web has initiated additional FSAPs in the Kyrgyz site, and applied a demographic-economic Republic, the Russian Federation, and Ukraine. In model to assess the economic consequences of late 2002 the Bank held a regional conference on AIDS in Russia. anti-money-laundering approaches. Table 6.1 World Bank Lending to Borrowers in Europe and Central Asia, by Theme and Sector, Fiscal 1994-2003 (millions of dollars) 0 1994-97 1998-99 (annual (annual average) average) 2000 2001 2002 2003 THEME z Economic Management 386.2 723.2 98.6 127.4 636.1 19.5 o Public Sector Governance 400.3 547.7 227.8 95.6 1,313.7 319.2 Rule of Law 79.2 80.1 160.2 77.4 106.6 265.5 Financial and Private Sector Development 1,826.3 1,908.0 890.7 1,074.0 2,210.8 512.9 Trade and Integration 259.3 91.6 143.5 138.4 32.5 120.2 Social Protection and Risk Management 248.9 575.6 530.1 381.2 363.9 288.8 _ Social Development, Gender, and Inclusion 48.1 126.9 43.6 65.1 188.8 55.9 Human Development 211.0 217.6 278.9 51.1 138.3 553.7 Urban Development 301.7 248.9 153.6 383.9 65.4 216.7 Rural Development 231.1 331.5 213.4 137.6 309.9 194.9 Environmental and Natural Resource Management 384.5 404.3 301.7 161.3 157.5 122.7 Theme Total 4,376.7 5,255.1 3,042.2 2,693.1 5,523.6 2,670.0 z SECTOR Agriculture, Fishing, and Forestry 197.7 114.5 317.8 139.0 470.4 335.4 Law and Justice and Public Administration 863.8 1,568.5 796.4 445.2 2,170.9 697.8 Information and Communication 69.9 4.5 151.9 8.7 9.6 1.0 Education 86.0 299.2 22.7 62.5 83.2 395.0 Finance 525.6 484.0 176.6 803.6 1,295.9 196.8 Health and Other Social Services 304.8 359.7 277.8 281.9 524.7 415.3 Industry and Trade 792.9 817.4 604.7 296.5 552.1 269.0 Energy and Mining 915.2 849.2 398.6 336.6 218.0 262.9 Transportation 518.4 533.1 207.1 118.3 67.1 30.6 H Water, Sanitation, and Flood Protection 137.3 225.0 88.5 200.7 131.7 66.3 Sector Total 4,376.7 5,255.1 3,042.2 2,693.1 5,523.6 2,670.0 Of which IBRD 3,949.6 4,406.3 2,733.1 2,154.0 4,894.7 2,089.2 Of which IDA 427.1 848.8 309.1 539.0 628.9 580.8 lNote Lending is summarized in the 1 1 main theme categories and 10 main sector categories In the new thematic-sectoral system, which ncludes 68 themes and 57 sectors Numbers may not add to totals because of rounding. Environmental Sustainability environmental management expenditures and The Bank supported the region's Environment links between country development strategies Minister's Conference held in Kyiv, at which Bank and the environment. Projects in the Baltic Sea regional strategies for water resources, region, Lithuania, Kazakhstan, and Romania were biodiversity, sustainable development, and added to the Bank's Global Environment Facility attainment of the MDGs were discussed. The portfolio, and environmental projects in Croatia, Bank provided support to the PRSP process on Georgia, Kazakhstan, and Romania were added identifying the links between environment and to the Bank's IBRD/IDA portfolio. poverty, and completed pilot analytical work on -~~ ~ ~ ~ -10 swfAiHVbi I one wheel is a great invention, two wheels is how you move forward We created a qualitatively new company. Based on joint effort, combined experience and modern technology, we have hard-wired potential for growth - so we move toward our goals faster and with greater confidence. RUN The activityof the Compan-es s dtly licenc-d n ancordartc- wth the legistation of the Ruh--o Federation 7. LATIN AMERICA AND THE CARIBBEAN fter sluggish growth of just 0.4 percent LATIN AMERICA AND THE CARIBBEAN H A in 2001, gross domestic product (GDP) in FAST FACTS Uthe Latin America and the Caribbean region contracted by 0.8 percent in 2002, Total population: 0.5 billion primarily as a result of deep recessions in Population growth: 1.5% de Life expectancy at birth: 71 years Argentina, thArgentina,the Republicae0lc Bolivarianaoiain eInfant mortality per 1,000 births: 28 Venezuela, and Uruguay. As a whole, the other Female youth illiteracy: 5% countries of the region grew by 1.6 percent, up 2002 GNI per capita: $3,280 Z slightly foNumber of people living with HIVWAIDS: 1.7 sightly from 1.1percent in 2001. million Argentina experienced a 10.9 percent contraction in 2002 following the abandonment Note: Life expectancy at birth, infant mortality rate female youth illiteracy are for of the convertibility plan, a sharp currency 2001.per 1,000 other births, indicators and are for 2002, from the World devaluation, default on the public debt, a Development Indicators database. The term gross severe banking and institutional crisis, and lack national income (GNI) is now used instead of gross of consensus on a macroeconomic program. national product (GNP). Although there were indications of a recovery Total FY03 Total FY03 in the second half of 2002, the country's crisis New Commitments Disbursements tourism in neighboring Bolivia, IBRD $5,667.8 million IBRD $6,456.2 hurt exports and million Paraguay, and Uruguay, and reduced workers' IDA $152.7 million IDA $322.2 million remittances to Bolivia and Paraguay. With Argentina's freeze on deposits, Uruguay's Portfolio of projects under implementation as of June difficulties were compounded by massive withdrawals from Uruguayan banks. All told, Argentina's shocks provoked an economic financial contagion from outside and within the contraction of almost 11 percent in Uruguay. In region, lowered investor confidence and slowed Venezuela, meanwhile, a polarized political capital flows and economic recovery. situation caused a major drop in investment, Nonetheless, the economies of Chile, Colombia, high capital outflows, and a national strike at Ecuador, Mexico, Peru, and most Central the end of 2002, all of which culminated in an American and Caribbean countries showed 8.9 percent contraction of GDP. remarkable resilience, despite low commodity External factors battered all Latin American prices and higher borrowing costs. and Caribbean countries. Despite low interest rates in industrial countries, gross private WORLD BANK ASSISTANCE capital inflows dropped by $31 billion, down 40 percent from the previous year. Net foreign Increased poverty is the most devastating direct investment fell from $62 billion in 2001 consequence of the economic shocks countries to $46 billion in 2002. Sluggish growth in the in the region have sustained. In Brazil, for United States and Europe also depressed example, peaks in interest payments on the demand for exports from Latin America and the country's sovereign bonds have coincided, over Caribbean, pushing the region's export growth the last decade, with increases in poverty. down to 1.2 percent in 2002, from 11.9 percent Although poverty figures were not available to in 2000. Tourism revenues and worker assess the impact of the region wide economic remittances were also weak. contraction in 2002, Argentine analysts estimate Despite sound economic fundamentals, that more than half of that country's people uncertainties surrounding elections in Brazil and were living in poverty-an increase from about concerns about debt dynamics, as well as some a third in the mid- 1990s. The World Bank V-7'~ 7;j~~~~~~t; f t~~~i E~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~, V '4 I~~~~~~~~~~~~~ ©~~~~ X Interested in Brazil? WVe are a lead strategican1d fi cianil adi',isu a pre(ldoininilai pla ' *cin iliancial(1 //i/,!cnpil lk'/.d e>. ~~~~~~~~~~~~~~~~~~~~~~~~. W calso providGe our comlpanyll' with a lft// range of comwercial banking products andwrri icc. Unibanco. Your house bank in Brazil. ' - North America: +1 212 207 9407 * Europe: +352 225152 * Brazil: +55 11 3097 4845 - www.unibanco.com/wholesale ...... Debt & Equity Markets * Mergers & Acquisitions * Project Finance *Syndicated Loan * Trade Finance * Cash Management Services z COUNTRIES ELIGIBLE FOR WORLD BOX 7.1 RELIABLE D.AlA FOR AN BANK BORROWING: EFFECTIVE POVERTY REDUCTION Antigua and Barbuda STRATEGY Argentina Effective poverty reduction strategies depend on Belize reliable data about the living conditions of poor people: who they are, where they live, what they do, and what Bolivia they need. Detailed answers to these questions are Brazil essential for directing resources and funding to the best Chile effect, and for designing accurately targeted and inclusive policies and programs. Z Colombia In 10 countries in the region, Mejoramiento de las C Costa Rica Encuestas de las Condiciones de Vida (MECOVI) is Dominica meeting the need for better statistical data. A program supported by the World Bank, Inter-American Dominican Republic Development Bank, and the United Nations Economic Ecuador Commission for Latin America and the Caribbean, El Salvador MECOVI strengthens the capacity of national H Grenada statistics-gathering bodies. MECOVI provides technical vGrenada assistance that enables them to undertake household Guatemala surveys that focus on poverty, gathering information on Guyana income, consumption, and access to services. The Haiti program has been completed in Guatemala, Paraguay, r4 Haiti and Peru, and is under way in seven other countries. It Honduras also organizes events to raise awareness and provide Jamaica training on poverty measurement and survey techniques This MexicoMexico for all Latin American and Caribbean countries. training has included efforts to integrate race and Nicaragua ethnicity in data gathering so as to ensure the inclusion Panama of indigenous people and Afro-descendants in policy z Paraguay planning. Peru St. Kitts and Nevis St. Lucia BUILDING THE CLIMATE FOR St. Vincent and the Grenadines INVESTMENT C Suriname In Guatemala a $150 million financial sector Trinidad and Tobago adjustment loan supports an ongoing ambitious Uruguay reform program to strengthen the country's Venezuela, Republica Bolivariana de financial system, including banking legislation, measures against money laundering, and responded to resulting urgent demands for increased access by the rural and urban poor social assistance and financial sector support populations to credit and financial services. The with $600 million for an income-transfer Bank has also provided $41.3 million for program for poor households in Argentina, and projects to enhance competitiveness in El two adjustment loans totaling $303 million to Salvador, Guatemala, and Nicaragua. It has also help neighboring Uruguay cope with the crisis. provided analytical and advisory support to _* | This emergency assistance raised the Bank's these countries as well as to Costa Rica and total lending to Latin America and the Honduras, as they negotiate a free trade Caribbean to $5.8 billion in fiscal 2003. In agreement with the United States. addition to providing loans, the Bank A healthy investment climate is linked to a developed revised assistance strategies for country's capacity to mobilize skills, technology, Colombia, Ecuador, Guyana, Honduras, and innovation to increase productivity. A Bank Nicaragua, Pel L, and the Republica Bolivariana study published this year, Closing the Gap in de Venezuela; progress reports for Jamaica and Education and Technology, recommends that Uruguay; and a country reengagement note for governments invest in education while they Haiti, while preparing timely policy notes for create incentives for increased private newly elected governments in Bolivia, Brazil, investment in research and development. Colombia, Ecuador, and Paraguay. These Although secondary school enrollment in Latin strategies emphasize helping countries build America and the Caribbean has doubled since the climate for investment and improve the 1970, many secondary school completion rates situation of the poor by investing in their of countries in the region lag behind those of essential water services, health, education, several other regions and thus create a power, and transportation sectors. (See box 7.1.) "knowledge and technology gap." Several Bank ENERGY TO CREATE HEAT ENERGY FOR STEAM DRIVEN POWER Ei -GJY FOR ELECTRICITY ENERGY...FOR ASIA poo..7 I - ~ ~ ~ ~ * _ ., ....__ = _ -- .. , .....4,_ _ . _ . . - .. ,*. ..~ . .,a :~~~~a ,sa .,fi-- -..... -;.--,-, '-- i-- e __ _; -- ~~- .- ,, -... -. . -. . . . i t.~? - _ - _ - --t' ' - ;vE*_- ..... ~~ ~ ~ ~ S _ Idns a ... . , ia Thaland _,d.;s m , _ .... ., .m ,', l *_ 'A~~~~~~~~~~~~r ; . , ;,-e ,l S I; .- ', . _ JR ~~~~ %% ~~~~~~- - |>~~~~~-- "" - - - > ;;e hi -b*i - * _ * - s . e' r_ Tl:6n si 7504589-90 - WI~ ~ .t '~ ''.0 \ 7 r " 2*' *X I I l ~~~'9foradthemnthuadDf Asian industrie. Bap ...Eery orAsa ortoay... an to oro Ba- Pulc opayLiie With more than 20 years of coai mining expertise and extensive coal reserves, Banpu Public Company Limited Is helping to supply the increasing demand for energy across Asia. Today our mines inC Indonesia supply Japan, Korea, Hong Kong, The Philippines, Malaysia. Thailand, India and many more I IRI countries in the region the coal-based energy they need. Banpu is proud of its continuing role in driving DANPOU forward the many thousands of Asian industries. Banpu ...... Energy for Asia for today ...... and tomorrow . Banpu. Public Co~mpanv Limited Thailand: +66 2694 6600 Indonesia: +62 21 7504589-90 * ~ ~ ~~~~~' -F - Urq - A, I '''At - jX 1 9 _- ;k. .i . : *~ll|w~ !_ 2 C,1 0K v_1 0 w _ Figure 7.1 Latin America and the Caribbean: IBRD Figure 7.2 Latin America and the Caribbean: IBRD and IDA Lending by Theme, Fiscal 2003 Share of total of and IDA Lending by Sector, Fiscal 2003 Share of total of $5.8 billion $5.8 billion Rural Development Environmental & Natural 7% Resource Management 4% Water, Sanitation Agriculture, Economic & Flood Protection Fishing /i \ Management 10% 7% & Forestry 1% Urban Public Sector Transportation Law & Justice Developmen Governance 14% 3%& Public 7% Administration X ~~Human Rule of Law Energy & 26% Development 2% Mining 2% Intrration1 20% Fnancial & Private Industry &Communication Sector Development Trade 3% 1% 15% Education 13% Social Development, Trade & Integration Health & Other Gender & Inclusion 2% 1% Social Services 27% Finance 17% H Social Protection & Risk Management 18% loans seek to bridge this gap by increasing wells, promote water conservation, and access to and quality of education in Brazil, improve efficiency and service at Lima's public Colombia, the Dominican Republic, Jamaica, water utility. The project also expanded service Mexico, Nicaragua, and Uruguay. to 600,000 previously unserved slum dwellers. Effective governance is an important factor In many countries across the region, in attracting and keeping investors, in addition achieving the MDGs by 2015 will require new to its obvious benefits in delivering sound investment in health and basic education as economic management and government well as infrastructure. Bank support for health services to citizens. The Bank is supporting care expansion continued in Mexico, building diverse initiatives in this area, including judicial on the success of a project launched in 1996 modernization projects in El Salvador and that had extended basic services to more than 9 Honduras; a public sector technical assistance million people in remote and indigenous program in Guyana; support for administrative communities, many of whom had never before decentralization in Bolivia; and programs to benefited from health care. Partnerships with improve municipal management in Brazil, governments were also strengthened to prevent Mexico, and Nicaragua, among others. HIV/AIDS, with new projects launched in H Grenada and in St. Kitts and Nevis, and support ACHIEVING THE MILLENNIUM continuing for similar programs in Barbados, DEVELOPMENT GOALS Brazil, the Dominican Republic, and Jamaica. The Bank's support for environmental As part of its commitment to help countries sustainability in Latin America and the achieve the Millennium Development Goals Caribbean, which includes more than 80 active (MDGs), notably reducing child mortality, the projects totaling about $2.3 billion, was Bank is working with governments to expand highlighted in November 2002 when Bank water and sanitation services to poor people. President James D. Wolfensohn met with Clean water is essential for healthy children and Amazon leaders in Belem, Brazil, to discuss the adults. Access to an improved water source in country's strategy for sustainable management Latin America and the Caribbean had reached of the Amazon region. The Bank supported the 85 percent of the population in 2000, but some strategy by coordinating the Pilot Program to countries remained below the 80 percent level. Conserve the Brazilian Rainforest, a partnership In its financing and technical assistance in the funded with $340 million from Brazil, the water sector, the Bank uses a variety of European Union, the Group of Seven approaches involving both public and private industrialized countries, and the Netherlands. sector investments to expand water and A similar biodiversity conservation effort is sanitation service to poor people. These under way in Mexico and Central America, approaches include a $50 million project to where the Bank is working with seven countries expand water service to 1.3 million people in to protect the Meso-American Biological rural Peru, as well as financing to rehabilitate Corridor, a regional system of natural areas, water supply and sanitation networks and buffer zones, and connectors that is home to Table 7.1 World Bank Lending to Borrowers in Latin America and the Caribbean, by Theme and Sector, Fiscal 1994-2003 (millions of dollars) z THEME Economic Management 359.9 694.0 587.6 570.1 391.0 567.2 Public Sector Governance 516.1 825.2 519.9 1,099.7 1,182.8 798.6 Rule of Law 70.1 94.1 111.7 202.2 15.5 88.8 - Financial and Private Sector Development 1,115.0 1,626.9 1,056.1 985.4 965.4 864.8 Trade and Integration 119.2 144.6 160.7 218.3 83.9 64.6 Social Protection and Risk Management 453.3 1,002.4 901.2 530.0 310.4 1,071.3 Social Development, Gender, and Inclusion 259.8 359.1 141.5 371.7 248.9 123.1 Human Development 617.9 786.9 157.7 471.2 560.4 1,150.7 Urban Development 507.6 576.9 53.3 202.0 251.9 435.2 Rural Development 442.4 613.3 103.0 580.8 168.3 415.9 z Environmental and Natural Resource Management 490.7 164.8 270.8 68.8 187.4 240.3 Theme Total 4,951.8 6,888.3 4,063.5 5,300.1 4,365.8 5,820.5 SECTOR Agriculture, Fishing, and Forestry 253.0 326.4 104.1 72.3 85.0 58.4 Law and Justice and Public Administration 1,018.3 2,208.9 1,787.8 1,722.9 1,299.5 1,556.9 Information and Communication 16.9 17.2 28.7 97.8 16.5 52.4 Education 631.8 659.8 62.8 529.1 560.4 785.5 Finance 747.7 1,089.5 1,195.1 950.5 734.1 981.0 Health and Other Social Services 550.9 1,150.5 360.2 904.7 660.5 1,574.1 Industry and Trade 83.7 204.2 165.3 38.3 51.4 183.4 Energy and Mining 184.9 98.1 79.3 107.6 445.6 96.2 Transportation 872.9 875.6 11.6 650.3 463.1 146.4 Water, Sanitation, and Flood Protection 595.9 258.0 268.7 226.6 49.8 386.2 Sector Total 4,951.8 6,888.3 4,063.5 5,300.1 4,365.8 5,820.5 Of which IBRD 4,658.6 6,406.4 3,898.1 4,806.7 4,188.1 5,667.8 Of which IDA 293.2 481.9 165.4 493.4 177.8 152.7 Note Lending is summarized in the 11 main theme categories and 10 main sector categories in the new thematic-sectoral system, which ncludes 68 themes and 57 sectors. Numbers may not add to totals because of rounding In fiscal 2003 under the Multicountry HIWAIDS Prevent on and Control Adaptable Program Lending (APL) for the Caribbean region, the Bank approved three operations (Grenada, St Kitts and Nevis, Trindad and Tobago) totaling $30.1 million in new commitments nearly 24,000 species of flora and over 500 partners agreed on a business plan that species of mammals. In December 2002 the identifies another $70 million in projects, in Corridor's host governments, donors, and addition to the $400 million already pledged. © World Bank. Curt Carnemark, 1994 IL~~~~~~~~~~~~~~~~~~~ -w -C P I a ... ,, : ------L, '- ____ 8. MIDDLE EAST AND NORTH AFRICA r z ncertainty stemming from the war in Iraq MIDDLE EAST AND NORTH AFRICA C as well as the ongoing Israeli-Palestinian FAST FACTS crisis served to deepen the economic downturn in the Middle East and North Africa Total population: 0.3 billion region in calendar year 2002. Economic growth Population growth: 2.0% fell pecentfro 3.2 in2001 toLife expectancy at birth: 68 years for the region fell from 3.2 percent in 2001 to Infant mortality per 1,000 births: 44 3.1 percent in 2002, with continuing declines in Female youth illiteracy: 26% investor confidence, export market growth, and 2002 GNI per capita: $2,070 tourism. tourism. ~~~~~~~~~~~millionNumber of people living with HIV/AIDS: 0.07 Despite the economic and social reforms embraced by several countries in the region, it Note: Life expectancy at birth, infant mortality rate continues to suffer from many of the same per 1,000 births, and female youth illiteracy 2001, other indicators are for 2002, from theare World for problems that have hindered growth since the Development Indicators database. The term gross 1980s. The private sector-key to job creation- national income (GNI) is now used instead of gross remains underdeveloped and has yet to emerge national product (GNP). as an engine for growth in the region. Total FY03 Total FY03 Inadequate financial systems and governance New Commitments Disbursements structures continue to stall expansion of the IBRD $855.6 million IBRD $513.6 million private sector, thus limiting the participation of private businesses in the economy. And the Portfolio of projects under implementation as of June impact of the region's legacy of conflicts has 30, 2003: $4.8 billion stretched throughout the region, effectively diverting resources and hampering the the region to create jobs and empower poor potential to attract foreign investors. people with knowledge and skills that enable Today the biggest economic and social them to build sustainable livelihoods. To challenge facing the majority of countries in the achieve these goals the Bank's regional strategy region is unemployment, which ranges from addresses five common challenges faced by less than 5 percent in economies of the Gulf countries in the Middle East and North Africa: Cooperation Council to approximately 30 public sector efficiency and governance, private percent in countries such as Algeria and Yemen. sector development and employment creation, In West Bank and Gaza unemployment is more education for living in a global economy, water than 50 percent. At the regional level the management in a water-stressed region, and unemployment rate averages 15 percent, and gender equality. In fiscal 2003 lending totaled jobless rates among youth are twice the $1.1 billion in 9 countries for 19 projects that regional average in some countries. As the supported reform and investments in the public labor force grows, the region will need to and private sectors, education, water supply create about 4 million jobs a year to and natural resource management, agriculture, accommodate new entrants into the labor and infrastructure. market. In response to the region's growing interest in sustained engagement in policy reforms, the WORLD BANK ASSISTANCE Bank continued to share knowledge and advice through programmatic economic and sector The World Bank's overriding goals in the Middle work, offering a series of analytical, advisory, East and North Africa region continue to and learning activities. In Morocco, for example, revolve around building a favorable investment the Bank helped the government develop a climate and restoring sufficient confidence in public expenditure review that links z COUNTRIES ELIGIBLE FOR WORLD Figure 8.1 Middle East and North Africa: IBRD and wBANK BORROWING: IDA Lending by Theme, Fiscal 2003 Share of total of $1.1 BANKBORROWING: ~~~~~~~~~~~~~~~~~~~~~~~~~~~billion Algeria Djibouti Environmental & Natural Economic Egypt, Arab Republic of Resource Management 18% Management 0% - . ~Public~~~~~~~~~~~~~~~~~~~~~~J Sector Iran, Islamic Republic of Iraq Rural Development Governance 10% Jordan 1/ Rule of Law Lebanon 5% Financial & Morocco Urban Private Sector C Syrian Arab Republic Development Development 24% 5 v: Tunisia Trade & Yemen, Republic of Integration <1% /e \ ,, Social Protection & L ~~~~RiskManagement H This section also reports on the West Bank and 9% Gaza. Human Development LSocial Development, 13% Gender & Inclusion 6% expenditures to results achieved in the country, Gaza and the continued deterioration of starting with health. The Bank is also delivering socioeconomic conditions led the Bank to advice on pension reform in Egypt, Iran, Jordan, expand its support for emergency social and Lebanon, and West Bank and Gaza. At the municipal services to Palestinians. Two regional level the Bank sponsored the emergency services support projects provide Mediterranean Development Forum in Amman critical support for the health and education and the Knowledge for Development sectors. The Bank plays an important role in Conference in Marseilles. These forums proved coordinating bilateral and multilateral aid to effective in engaging civil society groups, the Palestinian Authority. At the request of the initiating dialogue, and focusing governments' donor community, the Bank produced its second attention on such issues as gender, HIWAIDS, emergency assessment of the economic crisis and governance. In addition, the Regional and dis-bursed$55million in trust funds to Water Initiative continued to promote dialogue much-needed social services, despite difficult among governments to improve the circumstances there. management of water-a critical issue in a After a seven-year hiatus and at the request water-distressed region such as the Middle East of the Government of Iran, the Bank H and North Africa. formulated an Interim Assistance Strategy that Knowledge sharing has been at the core of focuses on policy dialogue and support for the Bank's development assistance to Gulf reforms through non lending as well as lending countries for many years now. The activities in targeted sectors such as water, Reimbursable Technical Assistance Program sewerage, low-income housing, and the extends technical and policy advice on a environment. In fiscal 2003 two projects were reimbursable basis to countries whose high approved-one was aimed at reducing the levels of income make them ineligible for impact of water and air pollution in major lending. The technical cooperation program cities, and the other at relieving social and with Saudi Arabia, which spans more than two economic hardships caused by two devastating decades and is the largest to date, emphasizes earthquakes last year. private sector investment, infrastructure reform, In line with the United Nations Security water strategy, and long-term economic Council Resolution, the Bank is undertaking a planning. In Kuwait the program supported the range of activities in support of Iraq's government's reform efforts in private sector reconstruction and long-term development. participation and investment, infrastructure, Work is under way to prepare a needs fiscal policies, and human development. This assessment in coordination with a number of year the Bank signed the first multiyear bilateral and multilateral organizations, such as technical assistance program with Kuwait for the United Nations, the Islamic Development the 2004-05 period, which includes the Bank, and the European Union, among others. assignment of a long-term adviser to the A team of World Bank and international Ministry of Finance. experts has been assessing the most pressing The ongoing conflict in the West Bank and needs for the reconstruction of Iraq, mainly in Zi'Sr.1|.ELIIPr'1 An # I'll a{' < 1111ri.'. d¶'~~~~~~~~~~0 ,,./, S~~~~~~~~~~ i Welcome to our worlds. Set amidst central Namibia's rolling hills, -L1. _ 3 >.. Windhoek-withitsrichcultural diversity-is the perfect destination for visitors longing for a real taste of Africa. Restaurants serving African and European delicacies, artisans' markets with exquisitely tempting gifts, unequalled nightlife, local tours, carriage rides, museums, day safaris, and of course-with the vast outdoors and 360 sunny days ~"*~ - per year-worlds of possibilities. Windhoek features a modern infrastructure and sophisticated banking -, 19 s X >and medical services, world-class accommodations and advanced telecommunications. _ i aq j ' ' As a conference destination, Windhoek has a proven record of organisational expertise providing state-of-the-art audiovisual IL- , \ equipment, interpreters and venues for up to 2000 delegates. f Excellent roads and two airports facilitate travel throughout southern ,il,__ 4 ; . t - - - , , , Africa and the world. - - >,d_i For the best of both worlds, come and experience Windhoek, gateway to the diversity of Southern Africa. UUM~~~~~~~~~~~~~~~~~~~~~~~~~ -~~~~~~~~ iwAl I, Fax.H+264 61) 290 2546 E-Ma;[.ma;~wmdhoekccLorg.na Manager. Corporate Communications and CustmerareTal+2661)90232 F ~+646i290583E-Mail commrruncao1o~w;oImoekcc.co9gna _1. W i w d THE PROSPECT OF OUR SEDIMENTARY BASINS IFi2*I ; AND THE FAVOURABLE FRAMEWORK OF OUR RESTRUCTURED HYDROCARBONS PETROLEUM LAW OFFER POTENTIAL INVESTORS INTHE UPSTREAM SECTOR 40. OPPORTUNITIES FOR HIGH RETURNS WITHIN AN ENVIRONMENT OF STEADY ECONOMIC AND A T 2- -'I--~~ - ~b212 1 PRTESHIS2 AE 1X T X l J # J : * 0 v ,.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~a. el PARTNERrSHIP BASD OFFICE NATIONAL DES HYDROCARBURES ET DES MINES - ONHYM - ( ex ONAREP ) 34, Avenue Al Fadila - 10050 - Rabat - Maroc Tel :+21237238000 - Fax :+212 3728 1626 Web: www.onarep.com E-mail: [email protected] Figure 8.2 Middle East and North Africa: IBRD and services and infrastructure, the Bank is helping IDA Lending by Sector, Fiscal 2003 Share of total of $1.1 local authorities better deliver and manage public services through training, computerization of tax management, and Water, Sanitation Agriculture, reforms in working procedures. A policy-based & Flood Protection Fishing & loan is supporting Jordan through its second 17% / Forestry. 19% year of wide-ranging reforms to make the Transportatin .public sector more service-friendly and to 10% improve budgetary and financial management Law & Justice and judicial reforms. - &Public Energy & s Administration z Mining 0% / 20% Industry & EMPOWERING POOR PEOPLE Trade 7% Information & Health & Other Communication With about 23 percent of the 300 million Social Services 12% <1% people in the Middle East and North Africa Finance < 1lo Education 15% living on less than $2 a day, empowering ~poor ______people constitutes an important strategy for fighting poverty. Through a combination of the areas of health, education, power, analytical, advisory, and lending services, the agriculture, water, and economic management. Bank aims to provide poor people with the necessary skills, resources, and infrastructure to BUILDING THE CLIMATE FOR improve the quality of their lives. A rural INVESTMENT employment project in Algeria created jobs by engaging poor people in labor-intensive work, Creating a business-friendly environment such as reforestation and flood control remains an important priority for the Bank in structures, and by financing fruit tree the Middle East and North Africa, where plantations and vineyards with farmers' geopolitics pose an added challenge to participation. The results led policymakers to attracting investors. Investment climate adopt similar approaches in their rural assessments conducted in Algeria and Morocco development programs. revealed the obstacles faced by investors. In Morocco a rural water supply and Among the key constraints identified are sanitation project increased the safe, potable administrative bottlenecks, limited access to water supply to 300,000 rural dwellers and credit and industrial land, and human resource lowered by about a quarter the incidence of constraints, all of which ultimately undermine diarrhea in children. Children who traveled long the competitiveness of the countries' private distances to fetch water had more time to sector. The Bank has initiated similar dedicate to schooling: primary school assessments for Iran, Oman, and Syria. This year attendance for qirls and boys rose b 70 ercent the World Bank Group also organized a consultation tour, stopping in Jordan, Lebanon, and Syria to engage local businesses in active BOX 8.1 LITERACY THROUJGH POETRY 77 dialogue about boosting trade and investment. "Wealth does not come to the one who sits, except for In North Africa the SM Exchange Program is those who own shops or who studied in schools" croons promoting partnerships between private aYemeni woman who learned to write poetry through an innovative pilot project that draws upon the Republic businesses on both sides of the Mediterranean of Yemen's rich oral traditions to teach literacy. Sea. A joint Bank-IFC initiative is With only a quarter of its adult females literate, Yemen complementing these efforts through programs faces a big challenge in narrowing the gender gap in as education and achieving the Millennium Development that deliver improved business services, such Goal of promoting gender equality by 2015. introducing new credit instruments, In partnership with Yemen's Ministry of Education, the streamlining registration and licensing World Bank-funded project responds to the needs of procedures, and helping business associations women who want to learn to read and write simple letters and documents, short Quranic verses, road signs, improve the quality of services they provide to or instructions on food and pesticide containers. their members. About 100 rural women learned to read by creating and Public sector efficiency is critical in paving sharing poetry with other women in their communities. The project has attracted interest from other donors and the way for a healthy investment climate. In received support through Yemen's Social Fund for Tunisia, where urbanization is placing increased Development for continuing and expanding the literacy pressure on municipalities to maintain basic program. Table 8.1 World Bank Lending to Borrowers in Middle East and North Africa, by Theme and Sector, Fiscal 1994-2003 (millions of dollars) _ 1994-97 1998-99 (annual (annual average) average) 2000 2001 2002 2003 THEME z Economic Management 50.5 5.2 0.0 11.9 5.0 0.0 Public Sector Governance 95.6 89.8 130.6 102.6 93.3 106.6 Rule of Law 40.3 59.5 9.3 56.5 49.1 48.0 Financial and Private Sector Development 345.8 361.1 61.8 78.8 204.1 48.3 Trade and Integration 34.6 38.8 3.0 3.4 24.8 3.6 Social Protection and Risk Management 65.3 87.4 100.0 5.6 11.0 96.1 Social Development, Gender, and Inclusion 69.9 64.5 71.6 52.5 13.4 63.1 Human Development 76.3 179.0 187.9 35.7 61.9 140.9 Urban Development 82.5 125.9 143.5 46.7 55.8 262.7 Rural Development 183.9 175.3 89.2 86.4 14.5 100.6 Environmental and Natural Resource Management 145.4 94.2 123.3 27.5 21.7 186.0 Theme Total 1,161.5 1,280.8 920.0 507.5 554.5 1,056.0 z SECTOR Agriculture, Fishing, and Forestry 203.4 147.9 120.6 46.5 2.9 196.7 Law and Justice and Public Administration 131.7 236.0 108.9 161.5 74.7 213.6 Information and Communication 11.9 33.8 1.3 59.2 69.9 2.3 Education 94.6 94.2 197.1 72.3 38.0 154.3 Finance 181.5 190.8 5.3 0.0 110.5 1.9 c Health and Other Social Services 77.1 159.8 158.9 39.3 41.7 124.2 Industry and Trade 146.5 168.6 47.9 27.0 71.7 74.3 Energy and Mining 45.9 56.8 0.0 0.0 1.3 0.0 Transportation 117.7 81.7 59.6 82.8 70.9 107.9 Water, Sanitation, and Flood Protection 168.6 110.9 220.5 19.0 73.1 180.9 Sector Total 1,161.5 1,280.8 920.0 507.5 554.5 1,056.0 Of which IBRD 1,005.6 955.5 760.2 355.2 451.8 855.6 Of which IDA 155.9 325.3 159.8 152.3 102.7 200.4 Note. Lending issummarized in the 11 main theme categories and 10 main sector categories in the new thematic-sectoral system, which includes 68 themes and 57 sectors. Numbers may not add to totals because of rounding Fiscal 2003 lending numbers in this table do not include Special Financing for two projects in the West Bank and Gaza, for a total of $45 mill on. and 40 percent, respectively. GLOBAL PRIORITIES Although the civil society movement is still nascent in the region, the Bank is giving voice The Middle East and North Africa region to poor people by engaging grassroots focused activities on the following global organizations in the preparation of the PRSP in priorities during this fiscal year. the Republic of Yemen. Following extensive consultations with civil society groups, Yemen's Maternal and Child Health first PRSP proposes a long-term frame-work for With children and youth constituting more than fighting poverty based on high economic half of the population in the Middle East and growth, human resources development, North Africa region, they are among the most upgraded infrastructure, improved access to vulnerable segments of society during times of social services, and enhanced social safety nets. economic stress and political conflict. In (See box 8.1.) coordination with the United Nations Children's OILT CotlsuiLatitS i) Lid * \ well estahlished and Leading Consulting Firni with niore than IiSO Perinaiient Staff * Registered with the Asian Development Bank Founider Member of the Societv of Consulting Aerchitecttural anid Enigineering Firins Nepal *Associate NMember of FIDIC and Technieal Consultancy Development P'rogramme in Asia and the Pacific. Numerous working experiences in Ncpal and Bhutan Field of Services Area of Major Specialization projects completed * Research and Studies *Engineering * Survevs and cssesment - Transportation 65 * Investigation, Testing and Analvsis - Irrigation and Akgriculture 36 * Detailed Enginieering Design and Drawing - Water Supplv & Sanitation 23 * Ire-conitract Services - Energc/Alternative Energy 20) * Contract Administration and * Urban and Regional Planning 15 Quality Control * Socio-economic and Einvironnmental 30 * IEE/ E,I and Environmental Assesment Monitoring and Auditing * Architecture and Landscaping 11 * Socio-economic Studies * Institutional Development/lIRD 14 * Training and \'. r,k'i11. p), * National level lPlanning and Policv 7 Communitv Niobilization Development * Project lentefit Mlonitoring and Evaluation * Solid Waste Mlanagement 7 Sustainable Development - Interdisciplinary Approach SIIT Consultants (P) Ltd. P.O.Box: 2724. Katlmmandu, Nepal Tel: 977-1-447086(6/4487598/44951t63 Fax: 977-1-4473573 Enmail: [email protected] W\ebsite: www.silt.com.np Contact personi: Ir. Keshav Kuimiwar - Managinig Director Tel: 9771-14470580 (Res) MIobile: 977-9851l020711 (@ SILT Consultatnts (F)Ltd. Fund (UNICEF) and other partners, the Bank is Supporting Trade and Integration conducting situation analyses and supporting With relatively low levels of exports and foreign community-based projects to deliver services for direct investments, the prospects for stimulating children. In Jordan the Bank is supporting a growth through greater openness and mentoring program to help at-risk children engagement with the world economy present integrate into their communities. In Egypt the much potential for the region. In preparation Bank is working with local organizations to for the 2003 Joint World Bank-international protect and provide solutions for child workers, Monetary Fund Annual Meetings in Dubai and such as including them in the formal education as part of its economic and sector work, the system or developing informal alternative Bank completed a study on trade and education for them. In November 2002 a investment climates in the region, offering conference on "Children and the Cities" policy advice on achieving faster growth, gathered some 80 mayors from around the creating more jobs, improving productivity, and Arab world to address the rapid growth of reducing poverty through trade and cities and the plight of children who live in integration. crowded quarters. 4 a 0 OL~~~~~~~~~~~~~~~~~~~~~1 H ~~ - ~~ -. il,' H~~~~~~~_1. W_ wr-R ~ - r .A~M¶L- ; ' , 6V ~~I1 _ ,_ _ N-. . > , ~~ - * ,N,~~~~~~0''",,_ ! f - ; Iir Ns India s ;ingle la-gest hydro power utility, IHPC i., poised to drive ts progressive earth-friendly development tcross the globe stablished in 1975, National Hydroelectric lower Corpciration Ltd. has the experience, .xpertise and capabilities to undertake nulti-dimensional activities such as planning, ;urvey, invEstigation, design, engineering, - *onstruction, )peration, maintenance, renovation, nodernizatior and up-rating of hydroelectric )rojects from -oncept to commissioning. *Ar ISO 9001 & 14001 Company *Installed capacity of 2475 MW *Executing additional capacity of more than 200 0 MN by 2012 *Authorized Share Capital of Rs.150,000 million *Consistent profit making organization *N t profit for 2002-03 is Rs.5105 million *Completed projects in Nepal and Bhutan ahead of schedule *RE giste ed with ADB & AFDB for consultancy services in India & abroad I~~~~~ e 1 p 1 F q r t- onational Hydroelectric Power Corporation Ltd. nhpc (A Government of India Enterprise) NHPC Office Complex, Sector 33, Faridabad - 121 003 (Haryana)-INDIA , Website: http://www.nhpcindia.com I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I © World Bank. Curt Carnemark, 1997 's%NW(. -' of{' ig 3 - :^^|--,-. *~~N_ ; ' '4 ||Se e@a'e rw gl!~~~~~~ -X-l,i|,'XW , vl//.F - J (1 t9 &,Fbi :05 .. 9. SOUTH ASIA South Asia's political, religious, ethnic, and SOUTH ASIA FAST FACTS linguistic differences are a testament to the diversity of the region. Although rich Total population: 1.4 billion in diversity, the region remains one of the most Population growth: 1.7% Life expectancy at birth: 63 years disadvantaged areas in the world. More than Infant mortality per 1,000 births: 71 one-third of its 1.4 billion people live on less Female youth illiteracy: 40% than $1 a day, making South Asia home to 2002 GNI per capita: $460 Number of people living with HIVIAIDS: 4.1 nearly 40 percent of the world's poor people. million Only 55 percent of the adult population is literate, with the literacy rate for adult females Note: Life expectancy at birth, infant mortality rate per 1.000 births, and female youth illiteracy are for only 44 percent. Because of the sheer size of 2001, other indicators are for 2002, from the World the population, South Asia's performance is Development Indicators database. The term gross critical to achieving the Millennium national income (GNI) is now used instead of gross Development Goals (MDGs). national product (GNP). South Asia's growth rate has remained Total FY03 Total FY03 substantially positive, averaging 4.2 percent of New Commitments Disbursements grossproduct domestic for calendar 2002IBRD $836 million IBRD $700.3 million gross domestic product for calendar 2002, IDA $2,082.7 million IDA $1,953.6 million despite the recent global economic slowdown, adverse weather patterns, and political Portfolio of projects under implementation as of June instability in the region. This figure, however, 30, 2003: $17.8 billion masks some variations in performance among the eight South Asian countries. areas to the north and east. During fiscal 2003 the South Asia region saw Although there is no clear consensus on a the peace process in Nepal and Sri Lanka uniform methodology to measure poverty rates advance and witnessed continued engagement across the region, Bank-sponsored analytical by the international community in Afghanistan. work in Bangladesh, India, Nepal, Pakistan, and In Bangladesh encouraging progress has been Sri Lanka is paving the way toward a better made on governance reforms since the general understanding of recent poverty trends. In elections of 2001. Pakistan's military Bangladesh the recent Poverty Assessment and government held elections for the first time the government's Interim Poverty Reduction since 1999 and a coalition government was Strategy Paper show that the pace of poverty formed. reduction has picked up considerably during the In Afghanistan reconstruction and 1990s. Likewise, a broad consensus has emerged development efforts are moving forward, but that India has made substantial progress in security concerns in parts of the country and in poverty reduction during this period, but more major cities remain an obstacle. In Nepal, attention is needed to address disparities, notwithstanding a ceasefire agreed to between especially between states, if the country is to the government and Maoist insurgents in achieve the MDGs. In Pakistan a new Poverty January 2003, the political landscape has Assessment presented extensive data on poverty remained highly fluid with the dissolution of and concluded that the country needs to close Parliament in October 2002 and two changes in its social gap in order to enhance its ability to government since that time. In Sri Lanka an grow over time. evolving peace process between the government and the Liberation Tigers of Tamil WORLD BANK ASSISTANCE Eelan has enabled the country to move ahead with much-needed reforms in the war-ravaged The Bank's work in South Asia is rooted in five z COUNTRIES ELIGIBLE FOR WORLD rlo;K '-1 §l: ' '., j BANK BORROWING: F' r , Iri.l ':l2l'. i. I) Afghanistan .' f1'' ( C Bangladesh Bahnuta e In fiscal 2003 the Bank provided support to the India government of Afghanistan by administering the Maldives internationally supported Afghanistan Reconstruction Nepal Trust Fund, which is helping cover recurring government Pakistan: costs and salaries. Sri Lanka A new Transitional Support Strategy (TSS) outlines the Bank's intended engagement over the next two years as the country moves from an emergency orientation to o interrelated strategic objectives that are central one focused on longer-term development. The TSS to delivering on the institution's overarching supports the government's own National Development J) iso.Teeaepoet euto,fsa Framework, focusing on four areas: improving mission. These are poverty reduction, fiscal livelihoods; assisting the government with its fiscal stability, governance, HIWAIDS and related strategy, institutions, and management; supporting - diseases, and issues of water. Intermediate goals governance and public administration reform; and helping enable private sector development. underpinning these objectives include improved The Bank's lending program in Afghanistan was revived macroeconomic management, improved in fiscal 2003 by the approval of Afghanistan's _ governance, a strengthened private sector Emergency Transport Rehabilitation Project, a $108 investment climate, improved access to basic million IDA credit, adding to the $100 million in grants that were approved for emergency reconstruction in services for the rural and urban poor fiscal 2002. The loan was made possible by Afghanistan's populations, progress on human development, clearing of all unpaid debt to the World Bank, which stronger management of the natural allowed the country to become eligible for loans for projects that move beyond the emergency situation to environment, and reduced risk and vulnerability help meet its longer-term development needs. for poor people. Bank lending is guided by the In Sri Lanka the Bank restructured its portfolio in fiscal z principal strategic drivers and is based on an 2003 and approved a $46 million package to provide extensive program of analytical work in the effortseIt is also administeNrinrth East reconstruction form of reports, workshops, policy notes, and Reconstruction Trust Fund, which is designed to meet 0 ongoing policy dialogue. Lending for fiscal 2003 the immediate needs of people affected by the former was..2.. billion. Priorities were support for conflict and to provide donors with a channel for X was$2.9 billon. Priorities were support for funneling resources rapidly. The Bank's Board discussed reform and investments in infrastructure, a new CAS for the country this year. New projects were agriculture, health, education, and rural approved in health, rural water supply, and financial sector reform. development. Additional Bank activities in the The WBI has developed learning programs that support region included ongoing commitments to the priorities reflected in both the Afghanistan postconflict and emergency reconstruction Transitional Support Strategy and the Sri Lanka CAS. In H ~~~~~~~~~~~~~~~~~~~fiscal2003 WBI established the Afghanistan and the Sri efforts in Afghanistan and Sri Lanka. (See box Lanka Distance Learning Centers, both of which use the 9.1.) latest distance learning tools and technologies. BUILDING THE CLIMATE FOR Project is expected to help the country modernize INVESTMENT its aging banking system. Sri Lanka's efforts to secure a lasting peace received support from a A strong and healthy investment climate is a credit to help the government implement a $15 priority across the region, and improving million Economic Reform and Technical Assistance governance is a prerequisite for this. Enabling Project to invigorate the economy and expand the private sector to fully contribute to the role of the private sector. Building on this, a economic development is also essential. $125 million Poverty Reduction Support Credit is Analytical work, lending operations, and policy helping improve Sri Lanka's overall investment dialogue are airned at developing a favorable climate for facilitating growth led by the private investment climate that is sustainable over time. sector. Similarly, in Bangladesh a $300 million The World Bank report, Bangladesh: Development Support Credit is helping improve Improving Governance for Reducing Poverty, the investment climate and ease governance published in January 2003, suggested that constraints on private sector investment. governance reforms should be prioritized. The improvement of roads and other travel The Bank's Board discussed a Country infrastructure is a critical component for the Assistance Strategy (CAS) progress report for Bank's work in South Asia because it has a Nepal that linked the level of the Bank's available major effect on poverty reduction-reducing resources to the pace of reform in the country. A transportation costs and increasing access to $16 million Financial and Technical Assistance markets, education, and healthcare. When it comes to human development, God's Own Couintry is India's No. 1 State There is more to Kerala than splendid beaches, One of the ten paradises of the world enchanting backwaters, magical hill stations, National GeographicTraveler rejuvenating Ayurveda... Seductive c India's No. I State - Confederation of Indian Weekend Financial Times, London Industry study, 2003 Kerala is worth the journey n maximum general achievement Time -i best law and order One of the hundred great trips a best workforce quality for the 21st century - good investment climate Travel and Leisure ,i best social infrastructure * India's most literate State State of enlightenment a India's most litrancedSoetae National Geographic Traveler a India's most advanced society c India's highest Physical Quality of Life Index Mecca of Ayurveda c India's highest life expectancy rate Geo Saison * India's lowest infant mortality rate Truly God's Own Country c Top urbanisation rates Paul McCartney God s Own eo,+ntry Kerala Tourism Park View Thiruvananthapuram 695 033 Kerala Email: infi4ikeralatourism.org Fax: 0471-2322279 www.keralatourism.org z Figure 9.1 South Asia: IBRD and IDA Lending by Figure 9.2 South Asia. IBRD and IDA Lending by Theme, Fiscal 2003 Sector, Fiscal 2003 Share of total of $2.9 billion Share of total of $2.9 billion O) Environmental & Natural Economic Management Water, Sanitation Agriculture, Fishing Resource Management 4% &Flood Protection &Forestry 7% 3% 1% Rural Development Public Sct1 5 - S h,I Public 14% Public Sector16% >7" J..r.~.jTr3T.. 13% Development Rul of Law <1% Transportationnraon <1% Transortaion ummuiation z ~~~~~~~~~~~~~~~~~~~~~~~~38% <1% Development Financial & Private EJj 2 19O Deveopmet1 "^t_ t/ sector Development 24% Social Developmer.v\ Energy & Mining Finance 6% Gender & Inclusion 7% 5/ H Social Protection & Trade & Integration Industry &Trade Health & Other Risk Management 6% 7% 5% Social Services 13% a, Infrastructure projects in Afghanistan, development and sharing its benefits. 2.1 Bangladesh, India, and Nepal are under way, Empowerment activities take place in both X4 providing much-needed investments that will analytical and advisory services and lending. v14 help reduce transportation costs and facilitate The Bank focuses on two areas: promoting I access to basic health and education services by education and health for all, and supporting poor people. India's $488 million Uttar Pradesh pro-poor rural development. 24 State Roads Project will help upgrade 3,500 The Bank's strong support for the social z~ kilometers of the state's existing road network. sector focus on promoting gender equality. In In Afghanistan the $108 million Emergency rural development the District Poverty Initiative Transport Rehabilitation Project aims to support Project in the Indian state of Andhra Pradesh is the government by removing transportation approaching a new phase, with expansion from bottlenecks and promoting the rehabilitation of the initial six districts to cover the entire state the highway and aviation networks. Among and with a sharper focus on the poorest and other things it has done, the $42 million most vulnerable communities. The $150 million Emergency Public Works and Community Andhra Pradesh Rural Poverty Reduction Project Empowerment Project has provided for has a component that promotes residential rehabilitation of the Salang Tunnel, which schools to ensure girls' enrollment. In H covers a critical section of the highway Bangladesh the Bank's $18.2 million Social connecting the city of Kabul to eight provinces. Investment Program Project targets excluded The tunnel is also the only entry point to Kabul and vulnerable groups, particularly the poorest for humanitarian aid and other goods, as well of the poor and women, through institutional as for refugees returning from the North. In development at the local level and the Pakistan a second generation of adjustment promotion of village organizations, with loans to provincial governments was approved, assistance from civil society and not-for-profit including the $100 million Sindh Province organizations. Additionally, the Bangladesh Structural Adjustment Credit to support the Development Support Credit is helping improve Sindh's economic reform program, and the $90 the management of public sector expenditure million Poverty Reduction and Economic by supporting policies to improve overall Management Credit to the North-West Frontier financial management and procurement and Province in support of the province's economic strengthen public sector accountability. In Sri and social reform program. Lanka the Poverty Reduction Support Credit will support actions to strengthen governance in EMPOWERING POOR PEOPLE the public sector, accelerate rural development, and improve the welfare system. In Nepal the Central to the Bank's work in the region is Bank is assisting the government to implement South Asia's poverty reduction strategy: to its strategy of transferring education, health, ensure that opportunities for improved irrigation, and water supply facilities to livelihood are widely available across the entire community management through investment spectrum of society and to remove constraints projects. that exclude people from participating in *8'4 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~o E .- 0 00 -~~~~~~~~~~ 0 ~ ~ ~ ~ ~ ~ ~ ~ - $~~~~~~~C4 E 0 0 4a U~~~~~~~~~~~~~~~~~~~~~~~~- C 0 X L- .~~~~~~~~~~~:> -~ v.1A, ~~~~ -~~~~~~~~ 1- CZ -0 o -r-5 On Lo xi ao0C -> ut> (UtunO> U ff4f onC U= "- ' Z r- -0 4~~~~~ -0 _ mLJ.C.L Q) = >W 0 CzL U0 z Table 9.1 World Bank Lending to Borrowers in South Asia, by Theme and Sector, Fiscal 1994-2003 (millions of dollars) o 1994-97 1998-99 (annual (annual average) average) 2000 2001 2002 2003 Z THEME Economic Management 40.1 85.3 35.2 47.4 232.5 123.5 r Public Sector Governance 37.3 254.9 212.7 261.0 678.0 467.3 Rule of Law 41.9 89.1 56.5 36.1 59.3 12.5 Financial and Private Sector Development 682.2 639.2 265.4 865.9 381.6 689.1 Trade and Integration 0.0 84.5 29.4 398.3 70.0 197.3 Social Protection and Risk Management 137.4 162.8 168.0 118.4 164.0 184.4 Social Development, Gender, and Inclusion 361.8 328.9 261.5 240.5 414.2 197.3 Human Development 308.1 627.5 276.2 124.8 30.2 546.9 Urban Development 210.6 297.1 300.7 186.8 766.2 2.6 Rural Development 353.0 377.0 426.1 379.5 417.2 403.7 Environmental and Natural Resource Management 407.5 266.8 80.8 587.8 295.2 94.2 Theme Total 2,580.0 3,213.2 2,112.4 3,246.6 3,508.4 2,918.7 SECTOR - Agriculture, Fishing, and Forestry 298.0 534.4 65.0 116.1 328.1 212.6 Law and Justice and Public Administration 269.4 436.3 407.0 377.4 632.5 372.3 Information and Communication 11.8 35.3 54.6 17.7 12.4 11.5 Education 324.2 385.1 171.4 206.4 95.9 364.6 Finance 239.9 168.2 46.0 209.7 310.0 185.8 Health and Other Social Services 439.2 589.3 393.3 188.1 278.7 369.0 Industry and Trade 121.4 68.3 85.3 34.0 443.1 144.9 Energy and Mining 360.6 545.9 277.8 746.2 504.8 150.6 Transportation 297.6 354.1 590.6 1,294.3 758.1 1,067.6 Water, Sanitation, and Flood Protection 304.9 96.4 21.4 56.8 144.9 40.0 Sector Total 2,580.0 3,213.2 2,112.4 3,246.6 3,508.4 2,918.7 Of which IBRD 961.7 1,034.0 934.3 2,035.0 893.0 836.0 Of which IDA 1,618.2 2,179.2 1,178.1 1,211.6 2,615.4 2,082.7 Note. Lending issummarized in the 11 main theme categories and 10 main sector categores in the new thematic-sectoral system, which ncludes 68 themes and 57 sectors. Numbers may not add to totals because of rounding. GLOBAL PRIORITY: HIV/AIDS nationwide epidemics, the Bank approved two South Asia today accounts for approximately projects in fiscal 2003 to build on the success of 4.1 million people living with HIV/AIDS. its ongoing program in other South Asian Although the infection rate in the general countries. In Sri Lanka the National HIV/AIDS population is still low, in absolute numbers Prevention Project ($12.6 million) will India has one of the largest HIV positive concentrate on prevention and on reducing populations in the world. Other countries in the stigmatization among vulnerable populations. region are characterized by a low prevalence Pakistan's National HIV/AIDS Prevention Project among the general population but significantly ($37.1 million) is designed to prevent HIV from higher rates among subpopulations engaged in becoming established in vulnerable populations high-risk behaviors. and from spreading to the general adult Recognizing that Sri Lanka and Pakistan population, while also avoiding stigmatization. have a small window of opportunity to prevent In addition to lending, the Bank facilitates dialogue among countries in the region to a wide range of learning programs on various share lessons learned, good practices of topics, including "AIDS and Strategic intervention, and research strategies. The Bank Communications," which was a training course also supports cross-country collaboration for for journalists covering HIV/AIDS in the South tackling such issues as migration and human Asia region. Other capacity-building activities trafficking. The World Bank Institute (WBI) has focused on fiscal decentralization and local been providing capacity-building support to the governments and on agricultural trade and the region through face-to-face and distance World Trade Organization. learning programs. In fiscal 2003 WBI conducted *,.- ,, .1~~~~~~~~~~~~~~~~~~1 _I.. > ^+ ,_ tt ; . I- Alf*j - X _ \ m E l--_ lSZS' = - _ .. . _ h ^, ...... m~~~~~~~~~~~~~~~ (I J'i7ruly Asia ,) j I I ,l ..... -. 4. jj L"*- .1 :~~~~~~~ I *= 1-. . 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4 tl~~~~~~~~l Ot~~~~N ...... All the enchantment of Asian culture in one destination. There is something magical about Asian culture. A beautiful fusion of Asia's greatest races and other ethnic groups, altogether weaving a rich tapestry of colours. There is only one country that truly captures all the excitement of Asian culture. Colourful Malaysia. Where Asia's greatest cultures - Malay, Chinese, Indian and other ethnic groups - captivate all your senses, you'll keep on coming back for more. TOURISMTI ... Kuala Lutnput, (Heaid Office): I 7,1 Floor. Alfensara Dato'On,,n, Putra WVorld Trade Centre. 45. Jalan Tlln issesail. 5 0480 Kl,eaha Lumpur MAlabysia. MviA#fI Tel. (03) 2693 5188 Fax: (03) 2693 5884 E-iail: [email protected]:myi) W'ebsite: u-u'rv.Iuorit-nzmiialaysia.gozsmiy ev 0 : : . , l rO . . _ ' . . . _ . | | | _~~~~~~ . . _ . . R . _ _ | . 11_0 . . _ | . . . _ _ -.-|0 . . _ . . . . __ . . j | ~~~~~~ | | |_ _ _| e | _ - E E ll _ _ c J~~QI | | _ | | | | _ - | * | _ _~~~~~ | | _ | | | | _ - | |~~~~~~~~ *~~~~~~F~ ~~ _ ~ 0 | | _ | | | | __ - i - | | J~~~~ | || _l__ | | |_ | - | * S _ _~~~ *| |_ _ w | | __ - | *| _ _ 0 *| |F_ _ | w| | s - | * 0 S _ _ - | |l _ _ _l l a l _5 -- | || | l | _ l z z~~~~~~~ * * -~~Qr~ R li . . * | _~~~~~~~ ©_Wol Bank Cur Canmr.18 -t 0 _1 fi~~~~~~~~~~~ _y~~~~~~~~~~~~~ ri r F~~~~~~~~~~~~~~~~~~~~ T HE WO0R LD BANK- PE R SPE CT I VE S ON DEV'E LOPMNiEN T ©DWorld Bank. Curt Carnemark *- @* *- 0 0 0 @-0 0 * 9 * *0@*------0 0 0 0 9 10. EAST ASIA AND PACIFIC z F ive years after the financial crisis, East Asia EAST ASIA AND PACIFIC FAST FACTS has reestablished itself as the fastest growing region in the world. Growth rose Total population: 1.8 billion more than 2 percentage points in 2002 to 6.7 Population growth. 0.9% Life expectancy at birth: 69 years percent-a surprisingly robust rate given the Infant mortality per 1,000 births: 34 H slow pace of global recovery and high levels of Female youth illiteracy: 3% uncertainty in the world economy. China 2002 GNI per capita: $950 Number of people living with HIV/AIDS: 2 million continued to emerge as a key regional H locomotive, growing by 8 percent and attracting Note: Life expectancy at birth, infant mortality rate nearly 40 percent of the growth in exports of per 1,000 births, and female youth illiteracy are for 2001, other indicators are for 2002, from the World other East Asian economies. Development Indicators database. The term gross Poverty at the $2-a-day level is estimated to national income (GNI)is now used instead of gross have fallen to its all-time lowest levels-to about national product(GNP). 40 percent for the region as a whole. Most Total FY03 Total FY03 countries have experienced declines in poverty, New Commitments Disbursements including countries such as Indonesia, the IBRD $1,767.1 million IBRD $2,303.5 million Philippines, and Thailand, where poverty rates IDA $543.7 million IDA $774.3 had risen after the 1997-98 financial crisis, but million where they have now fallen back to or are wherefallen they haveback now to or are Portfolio of projects under implementation as of June approaching pre-crisis levels. 30, 2003: $23.4 billion In 2003 the recovery in the region has been I_I buffeted by a number of unexpected shocks: the supplemented policy advice and technical outbreak of the sudden acute respiratory support with $2.3 billion in new loans. The syndrome (SARS) virus, uncertainty associated Bank continues to focus on: with the Iraq war, higher oil prices, and renewed * Improving the investment climate and weakness in the developed world. However, with revitalizing the business sector, including the SARS epidemic having been controlled and supporting public sector performance and the number of new cases having trailed off by enhancing governance, transparency, and the end of the second quarter, regional growth accountability should still reach or exceed a relatively robust 5 * Empowering poor people and percent in 2003. For the longer term the outlook enhancing social stability for the region remains positive, provided * Addressing global priorities, including countries continue to focus on improving public environment, trade, and the Millennium security and rule of law, maintaining sound Development Goals (MDGs). macroeconomic management, and strengthening governance. In addition, countries need to BUILDING T complete the restructuring agenda leftover from U HE CLINMATE FOR the crisis, improve financial sector supervision INVESTMENT and regulation, and undertake broader reforms The Bank is working in a number of areas to to strengthen the investment climate. help create the kind of environment necessary for sustainable growth and poverty reduction. WORLD BANK ASSISTANCE i Investment Climate Assessments, under way in Cambodia, China, Indonesia, Malaysia, During the fiscal year, the World Bank Mongolia, the Philippines, and Thailand, aim at [Excerpted, with changes, from The World Bank Annual Report 2003: Volume 1, Year in Review (Washington, D.C.: World Bank, 2003), pp. 94-98]. H z COUNTRIES ELIGIBLE FOR WORLD Figure 10.1 East Asia and Pacific: IBRD and IDA Lending BANK BORROWING: by Theme, Fiscal 2003 Cambodia Environmental & Natural Economic Management 1% China Resource Management 10% <( Public Sector Fiji Gc,..__rc,ance 15% Indonesia Ru ra Kiribati Development R.,ie .A Law <1% : Korea,Republic of 18% Financial & Private Korea,~ Republic ~ of~ ~~~~~~~~~~~~Sctr eelpmn z Lao People's Democratic Republic Urban Sector Development Development20 O Malaysia 10% / Marshall Islands Human Trade & Integration Micronesia, Federated States of Development 6% 7% Mongolia Social Development, Social Protection & H Myanmar Gender & Inclusion Risk Management 6% 7% Palau Papua New Guinea v:Philippines Figure 10.2 East Asia and Pacific: IBRD and IDA Lending Samoa by Sector, Fiscal 2003 X ~~~~Solomon Islands Water, Sanitation Agriculture, Fishing Thailand & Flood Protection & Forestry 5% ITimor-Leste 18% / Law & Justice & Timonga -Lfeste . Pl,t h,: Administration Tonga 17% Vanuatu . Information & Z Vietnam lommunication ______~~~<1% s . \ _1> ~~~~~~~~~~~~~~~~~~~~~~~~~~~Education10% improving the institutional environment for Transportation Finance 1% :Z private investment and identifying reforms that Health & Other - will lead to higher productivity, more efficient Social Services 8% firms, and ultimately more job creation. In Energy & Mining 11% Industry &Trade 1% Mongolia a legal reform project is supporting the establishment of an administrative court system, capacity building for legal and judicial innovations for city management. information, and legal education. In China a The Bank addresses governance issues team of Bank experts is advising senior officials through supporting programs that decentralize on financial sector reform, including bank government and build government capacity; at restructuring, capital market development, the same time, the Bank supports programs finance for small firms, and rural finance. And emphasizing public sector transparency and the Bank is using its semiannual reviews of the greater stakeholder participation. It is currently region's economic prospects, trends, and issues studying e-government initiatives to assess the to increasingly add to the policy debate role those initiatives might play in decreasing throughout the region. corruption through greater transparency and The Bank is emphasizing innovative activities enabling greater citizen interaction with throughout East Asia. To assist the region in government. Two capacity-building projects in meeting high-tech challenges of an increasingly Cambodia and the Lao People's Democratic competitive world, a new study, Innovative East Republic are helping strengthen government Asia: the Future of Growth, offers a set of capacity in a number of areas: management policy measures for developing and practices, policy development and strengthening innovative capabilities. The implementation, public expenditure Global Development Learning Network (GDLN) management, human resource management, provides regional and country-specific governance, and public administration. And in knowledge programs in 14 centers throughout Indonesia the Partnership for Governance Asia. And a new initiative, Info City, has been Reform continues to make advances on building electronic networks among city anti-corruption initiatives and reforms in the governments in the Philippines-and expanding civil service and in the legal and judicial sectors. to China and Indonesia-to foster partnerships and exchange the latest practices and ~im _ X ' .s ]82 ; *.' . b. . ' a1I-' ; STCI PROUDLY SHARES THE NATION'S MARCH TO PROGRESS Irndia is on the move. The financial sector is buzzing with activity. Massive investment plans are uinderway to support an ambitious GDP growth rate. In this great endeavour, STCI too has been playing a role - it's dominant role in the Gilts market. Promoted by leading Banks and Financial rInstitutions in India, STCI is a key market maker in Gilts and Corporate Bonds. With a paid-up capital ol: US$ 105 million. net worth of US$ 194 million and profit after tax US$ 44 million last year, STCI is sl.rongly positioned to spearhead the growth in India's debt market. STCI SECURITIES TRADING CORPORATION OF INDIA LIMITED India's Leading Primary Dealer in Gilts Regd Office: Krishra Chambers. 59, Sir Vithaldas Thackersey Marg, New Marine Lines, Mumbai 400 020 India. Visit us on www.stcionline.com H z Table 10.1 World Bank Lending to Borrowers in East Asia and Pacific, by Theme and Sector, Fiscal 1994-2003 (millions of dollars) 0 1994-97 1998-99 (annual (annual average) average) 2000 2001 2002 2003 THEME Z Economic Management 36.5 280.0 0.0 0.0 4.8 29.7 Public Sector Governance 215.8 543.1 556.2 65.1 127.4 341.5 Rule of Law 73.4 19.2 9.3 3.8 20.3 7.3 Financial and Private Sector Development 1,393.3 4,441.8 627.6 310.9 512.8 458.8 Trade and Integration 161.1 333.2 36.2 40.0 43.3 138.0 H Social Protection and Risk Management 179.3 708.4 55.2 239.4 138.7 161.5 Social Development, Gender, and Inclusion 181.6 273.5 72.1 248.0 173.0 143.7 Human Development 411.4 406.1 81.1 52.6 226.4 152.7 Urban Development 734.3 900.8 230.6 433.1 63.6 233.6 Rural Development 913.2 855.6 430.3 341.6 360.9 411.7 Environmental and Natural Resource Management 1,203.7 932.4 880.4 399.3 102.3 232.3 Theme Total 5,503.6 9,694.2 2,979.1 2,133.8 1,773.6 2,310.8 7 SECTOR Agriculture, Fishing, and Forestry 464.0 803.8 118.4 109.7 151.2 106.7 Law and Justice and Public Administration 425.8 1,066.5 590.3 255.3 115.2 385.1 Information and Communication 206.9 51.9 20.0 12.5 11.1 6.6 Education 417.7 411.6 84.4 14.8 134.6 225.7 Finance 207.4 3,180.8 36.3 89.6 219.2 22.7 Health and Other Social Services 253.5 581.6 118.4 217.3 243.8 184.1 Industry and Trade 242.7 1,569.8 28.8 151.8 9.4 32.5 Energy and Mining 1,623.6 517.0 640.5 142.2 314.5 254.3 Transportation 1,121.7 1,133.3 584.4 729.7 540.2 684.3 Water, Sanitation, and Flood Protection 592.0 377.9 757.7 410.8 34.4 408.7 Sector Total 5,503.6 9,694.2 2,979.1 2,133.8 1,773.6 2,310.8 Of which IBRD 4,385.8 8,800.9 2,495.3 1,136.1 982.4 1,767.1 Of which IDA 1,117.8 893.3 483.8 997.7 791.2 543.7 Note: Lending is summarized n the 11 main theme categores and 10 main sector categories in the new thematc-sectora system, which includes 68 themes and 57 sectors. Numbers may not add to totals because of round ng. F scal 2003 lending numbers in this table do not inc ude the fol ow- ing special financing of $6 5 million to Timor Leste and an IDA guarantee of $75 million to Vietnam. EMPOWERING POOR PEOPLE poverty. Another important element is a rural The Bank focuses on policies and institutions development initiative aimed at increasing that help households manage social risks, incomes and opportunities in rural areas, build an effective social policy framework, and given that well over three-quarters of East enable poor people to participate in the Asian poor people live in rural areas. benefits of growth. A key point of its strategy Social programs have increasingly in low-income countries is assisting the emphasized community empowerment and government in developing a Poverty demand-driven approaches to promote Reduction Strategy Paper (PRSP)-a efficiency, transparency, and effectiveness. In country-owned framework of macroeconomic, Timor-Leste the First Agriculture structural, and social policies and programs Rehabilitation Project has helped communities needed to promote growth and reduce receive farm animals and farm tools, has IT I - usl iE- aulle -A:S fl lw p ~ i-- Fr t - -e 0 Our skills.4 Bright future. I At Woodside, we aim to find, develop and operate oil and gas [:, - projects for the country and people who own the resources, cre- - ating wealth for them and value for our shareholders. 4rn~~ To do this consistently we work with our partners -the people of Africa, governments, non-government organisations and other oil and gas companies, to sustainably develop the resource. With astrong commitment to maximising the benefits for our host contry, we have active projects in Mauritania, Algeria, Kenya, Libya, the Canary Islands and Sierra Leone.o With 50 years' experience as a successful, responsible, efficient and effective oil and gas explorer, developer and operator, we are committed to working together in Africa in sustainable ways. e j 9 &\ j jl j W it h a . strong commWoodside:r~~~Enhancing the quality of life by meeting society's energy needs in ways that make us proud. AUSTRALIA WOODSIDE PLAZA GPO BOX D188 PERTH WESTERN AUSTRALIA 68406 Telephone: +618 9348 4000 Facsimile: +618 9214 2777 W O~ODSIDE UNITED KINGDOM ACN004 898 962 4TH FLOOR 7 ALBEMARLE STREET LONDON WIS 4H g Email: Companyinfoiwoodside.com.au Telephone: +44 207 514 5560 Facsimile: +44 207 629 9096 www.woods ideomtu.c au z repaired small irrigation schemes and roads, -BUX 11i.1 TRAL)E 1.N EAST ASIA >~J and has trained agriculture staff. The Second 2 Kecamatan Development Project is benefiting Although the region has benefited tremendously from 25 to 30 million25 torualrural 0 milionInonesiasIndonesians by givingivingthe trade Eastintegration-specifically Asian financial crisis export-driven brought a growth-sense of villagers tools for developing their own vulnerability, particularly for the lower income community through investments in basic countries, many of which have yet to see the benefits of > infrastructure such as feeder roads, drainage Withintegration. this in mind the Bank is studying the impacts of canals, markets, water supply pipes, and micro trade and ways to improve integration in the region to credit schemes. help countries better position themselves and benefit z The Philippines Social Fund for Peace and offrom regional trade. Keyand parts global of theintegration study focus on on the the poorereffects o Development Project is working to foster countries and households and on declining sectors. The lasting development in Mindanao by providing study addresses behind-the-border issues, including andsp t p t mj technical barriers and product standards, logistics, support to implement community projects and services sectors, intellectual property rights, and by involving the groups most affected by the environmental and labor standards. _ ongoing conflict. In Mongolia the Sustainable The Bank has supplemented the research through Livelihoods Project is helping tackle poverty capitals,consultations and developmentwith key audiences, of GDLN workshops Trade Dialogues in Asian in among the country's rural nomads (41 percent partnership with the World Bank Institute. - of the population) by expanding their access to financing, providing small-scale investment most East Asian countries to keep in infrastructure, and assisting with pastoral environmental issues on the agenda of risk management. And in China, where policymakers and public alike. tuberculosis is the leading infectious cause of death, the Bank is helping finance an Fostering Trade expansion of the national tuberculosis control The Bank is advising countries and the region z program to reach more of the poor, who are through research on the effects of trade and disproportionately affected by the disease. ways to improve integration in the region to benefit the country's growth and achieve GLOBAL: PRIORITIES poverty reduction goals. Besides working with GLOBAL PRIORITIE China on trade issues, the Bank is helping The Bank's East Asia and Pacific region is Cambodia and Lao PDR build in-country focusing activities on the following global capacity to analyze the impacts of trade priorities. integration and to implement pro-poor trade policies. And the Bank also is advising Vietnam Improving the Environment on World Trade Organization accession issues The Bank integrates environmental components and providing assistance on the kinds of into much of its lending in rural, urban, water, reforms Vietnam needs to undertake for and energy sectors. Furthermore, the Bank has accession. (See box 10.1.) forestry management programs under way in Cambodia, China, Papua New Guinea, and the HELPING COUNTRIES REACH THE Solomon Islands, and provides policy advice to MILLENNIUM DEVELOPMENT GOALS moo Indonesia. The Bank is assisting China's water management goals, including lending for flood In addition to ongoing policy and lending work prevention, irrigation system development, aimed at reaching the MDGs, the Bank is comprehensive river basin management, and assisting countries, such as Cambodia, Lao PDR, water conservation in water-short agricultural Mongolia, Thailand, Timor-Leste, and Vietnam, areas of northern China. And the Bank is using with improving data collection and analysis and the environment monitor series-annual with building their capacity to monitor trends country-based reports that track environmental in poverty and social indicators. issues of key concern to client countries-in 11. CHINA AND~~~~~~~~~~~~~~~~~~~~~z THE WTO BY WILL MARTIN z H fter a marathon, fifteen-year struggle undertaken by the World Bank and the A China joined the WTO at the Doha Development Research Center of China's State UMinisterial Meeting in November 2001. Council (DRC) has documented the extent of Clearly, China's entry was important simply by the reforms, and pointed to some of the bringing a fifth of the world's population into priorities for policy reform if trade is to play a the "world" trading system. By the time of positive role in improving people's livelihoods accession, China had also become a major and particularly in reducing poverty. player in world trade. When the process of A key feature of the reform process since (re)joining the world trading system began in 1986, and particularly during the 1990s has 1986, China's share of world trade was only 0.7 been replacement of direct, quantitative policy percent, but this had risen to almost 5 percent instruments with indirect, price-based in 2001, when China was the fifth largest instruments more suited to a market economy. exporter in the world, and is expected to rise to In the late 1980s, around two thirds of China's at least 7 percent following accession, making imports were subject to licenses or quotas, China one of the world's biggest trading foreign trading rights were restricted, foreign countries. Since joining the WTO, China has exchange was subject to significant controls, become a major player in the WTO, and and exports were partially planned. As late as particularly in the negotiations on the Doha 1992, average tariffs were over 40 percent. Development Agenda. By the time of its accession to the WTO, China had made enormous progress in THE REFORM PROCESS reforming its foreign trade regime. Tariffs declined continuously after 1992. Weighted When China initiated the process of joining the average tariffs fell from 41 percent in 1992 to world trading system, it had seven years of 12 percent at accession, and will fall to just 6.8 experience with the "open door" policy under percent after implementation of the WTO its economic reform program. It had made commitments. The coverage of nontariff major progress in increasing exports of raw barriers fell from two thirds, to one-third in materials and manufactured products, and the 1996 and 22 percent in 2001. All nontariff use of foreign direct investment. As the World barriers except for state trading, which is now Bank (1988) noted, the open door policy, along subject to WTO rules, and is likely to cover less with rural reforms and partial enterprise and than 10 percent of imports, will be phased out. price reforms, had contributed to a dramatic The dual exchange rate system was abolished in improvement in the performance of the 1994, removing the formerly substantial trade Chinese economy. However, many problems barriers implicit in this regime. One study remained: the Foreign Trade Corporations estimates the global welfare gains from China's created an air-lock between domestic and accession at $74 billion per year, of which foreign markets; export patterns were around $40 billion accrues to China. inefficient; information flows between Substantial progress was made not just in producers and markets were poor; and foreign foreign trade policies, but also in critical exchange markets were heavily distorted. behind-the-border areas needed to support During the process of accession to the WTO, trade, including development of the legal there was a dramatic improvement in the system; enterprise restructuring; strengthening performance of China's trade regime, and in of service sector regulation; and agricultural economic performance generally. A recent study and rural reforms. Many of these reforms were [Excerpted from Development Outreach: Putting Knowledge To Work for Development (http://wwwl.worldbank.org/devoutreach/index.asp), November. 2003 and based on Martin's China and the World Economy (Washington, D.C.: World Bank, 2004).] undertaken as part of the ongoing process of of (primarily labor-intensive) agricultural making the changes needed to ensure China's exports. This is particularly important because development. However, it is clear that the of the need to create rural employment in process of WTO accession influenced the timing China. It is estimated that the weighted average 0 of many of the reforms. In fact, the needs of barriers facing China's exports of agricultural VWTO accession may have helped reformers to products are four times as high as those facing > push through reforms much earlier than would her nonagricultural exports-and this estimate otherwise have been feasible. Certainly, the that is undoubtedly conservative because of the reform process initiated by WTO accession widespread presence of prohibitive tariffs, z requirements in areas such as legal reform was whose effects are not captured. o taken much further with the objective of Overall, there is likely to be some downward developing the legal structures needed to pressure on rural wages and incomes, with promote China's development. some-albeit small-adverse poverty impacts. Attempts to deal with these problems by FUTURE EXPANSION slowing down or reversing trade reforms would be very costly, even if they were possible under Quantitative analysis undertaken as part of the WTO rules. Policies that deal with these poverty Bank/DRC project found that the trade reforms impacts directly by improving rural technology required by China's accession will greatly and infrastructure; expanding educational expand China's trade. A key element in this will opportunities in rural areas, and reducing the be a dramatic expansion in China's exports of barriers to migration out of the rural sector are textiles and clothing after the abolition of much more likely to be successful, and are quotas on these exports in January 2005. It is explicitly consistent with WTO rules. estimated that exports of clothing will expand China has committed to dramatic opening of by over 100 percent as a result of accession. Had its services sector under the General Agreement she not joined the WTO, China almost alone on Trade in Services (GATS). In fact, one recent would have remained subject indefinitely to study concludes that China's accession offer is quotas on exports of these goods. Most of the the largest liberalization of services ever reductions in tariffs and abolition of nontariff undertaken under the WTO. Over half the barriers required under the agreement had sectors and modes of supply have been already occurred by the time of accession. liberalized, and considerable benefits to China's However, there are some major reductions still firms and consumers are likely. China's opening to be implemented in the motor vehicle was not done unreservedly, however. Many industry, and on the formerly highly protected reservations were included on issues such as beverage and tobacco sector. The key for the ownership structure and geographical location, motor vehicle sector will be major restructuring as well as the rights inherent under GATS in to increase efficiency, improve product quality, areas such as prudential regulation of the and reap economies of scale. If this is done banking sector. Liberalization of key service successfully, output and both imports and sectors involved in the logistics chain seems exports of motor vehicles and components are likely to allow substantial reductions in costs to likely to expand substantially. firms, which are currently much higher than There are likely to be some substantial international norms in China. Potential costs adjustments in agriculture, and these are likely savings are estimated to be equal to 10 percent to have important implications for poverty. The of gross output value. reductions in agricultural protection required by China has developed a modern intellectual accession are likely to be much smaller than was property rights system that takes into account predicted by many commentators. This is partly the fundamental differences between its because China's agriculture was only quite situation and that of the high-income lightly protected, and because China negotiated economies for whom production of intellectual moderately high tariffs on some key products, property rights are currently more important. such as rice, wheat and maize. However, export China has used the flexibility inherent in the subsidies that were formerly important for TRIPS agreement in areas such as pricing of maize and cotton had to be abolished, and pharmaceuticals to ensure that people have tariffs fell on products such as oilseeds, sugar adequate access to essential pharmaceuticals. and dairy products. As a key member of the One study identifies two potential areas of WTO, China also has the opportunity to press concern-one involving too much regulation, for reduction of the barriers against her exports and another involving too little. The first is with Q~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Cl) F-~ ct +-t r o" 0 4.~~~~~~1 -U..~~~~~~~~~~~~Ar D - ,"S, - i _ ~~~~-~ ~ S z -- s~~~~-*' ? ; -s -v- ; r, ~~~~* | 1 Z O ; Aj;E, f jh 4- ~ - _ G~~~~~~~~~~~~~~~~~~~- -4,_ proposals to patent software, which seem agreement, and the textile safeguards include o perhaps too protective of producer interests for poorly defined and potentially very damaging China's stage of development. The second area procedures on trade diversion. of concern relates to enforcement, where Within China, much has been done to weaknesses in enforcement are likely to reduce protect those in urban areas who are China's access to state-of-the-art technologies. disadvantaged by trade reform, but the social F- Fortunately, China-unlike Japan when it safety net remains "full of holes" in rural areas. joined the GATT-was able to avoid a situation Much needs to be done both to increase where major trading partners refused to apply opportunities for rural residents, and to help Most-Favored-Nation treatment. However, an protect them against adverse shocks, whether unfortunate feature of the accession agreement from external or internal developments. is the imposition of several types of trade-restricting measures. For up to 15 years, CONCLUSION China may be treated as a non-market economy for antidumping policy decisions-a Overall, it is clear that China's accession builds status that makes China more vulnerable to the on the progress made throughout reform antidumping measures than other WTO process, while marking a turning point through members. For up to twelve years after China's the use of external commitments to reform. accession, trading partners can impose While much-and particularly most of the product-specific safeguards against China's required trade liberalization-has already been exports. For several years after the textile and done, some major adjustments will be required clothing quotas are abolished, China's exports in formerly highly protected areas like of these products may be subjected to special automobiles and beverages and tobacco. textile safeguards. The antidumping measures Substantial further work will be needed on are of particular concern because China already complementary policies in areas such as faces seven times as many antidumping improved regulation in financial and other measures per dollar of exports as the United sectors, and in increasing opportunities for and States. The product-specific safeguards are new assistance to the poor, and particularly the poor protection introduced as part of a WTO in rural areas. Fujitsu, that's who. Our name might not be on the tip of your tongue, but you'll certainly have heard of the people we work with. In short, they're the world's biggest businesses and governments. Why do they choose Fujitsu? Because they know that when they have an IT problem, we have the people, the experience and the capability to crack it. And now that's something you know too. For more information call 0870 234 7800 or visit uk.fujitsu.com/thatswho FUJ ITSU THE POSSIBILITIES ARE INFINITE Source: Fortune 500 uk.fujitsu.com T H E W O R 1 D BANK - P R S P E CT I V' E S O N D E V E L O P MEE N T © World Bank. Masaru Goto, 2002 i':, X~~~~~~~~~~~~~~~~~~~~~~~~ J- a At 3:w0w *. \ ~~. 4//i IZC 12. FIGHTING CORRUPTION IN EAST ASIA: SOLUTIONS FROM THE PRIVATE SECTOR BY JEAN FRANCOIS ARVIS & RONALD E. BERENBEIM H I nitiatives by the public sector to fight countries in Europe and Asia, and in emerging corruption on the "demand side" have markets. Meanwhile, many existing programs in - generally drawn more attention than North America have been redesigned. Recently, "supply-side" efforts by private companies. Yet the importance of internal mechanisms has policymakers, international organizations, and received worldwide attention in the wake of advocacy groups such as Transparency major corporate governance scandals in which International regard such preventive efforts, poor ethics and compliance played no small now under way in all regions, as a critical part. component of the anticorruption toolkit. In 2000 the Conference Board, an All types of firms-large and small, independent global business membership multinational and local-recognize that organization, asked major companies corruption raises the cost of doing business. worldwide for information on their Recent studies such as the World Business anticorruption programs. The survey found z Environment Survey provide a wealth of compliance-style anticorruption programs in 42 evidence on firm perceptions and behaviors countries. Of the respondents, 40 percent were regarding corruption. Managers of based outside North America and Western medium-size firms perceive the intensity of the Europe-a sharp difference from earlier surveys, H problem in much the same way as do which found that the approach had not spread representatives of international companies in beyond North America and the United the same country. Not surprisingly, smaller firms Kingdom. tend to be more vulnerable to corrupt practices. To better understand how compliance - Most company-based programs for fighting programs work, the Conference Board and the H fraud and corruption rely on ethics and the World Bank's East Asia and Pacific Region implementation of compliance systems. These investigated the programs of East Asian systems typically consist of statements of values, companies, as well as subsidiaries of Northh company codes of conduct, training programs, American and European firms operating in East and decisionmaking and reporting mechanisms. Asia. The research focused on: This approach was pioneered in the 1970s by * Identifying the state of the art in U.S. multinational corporations after revelations corporate compliance programs of unethical practices and in response to the * Understanding mechanisms and 1977 U.S. Foreign Corrupt Practices Act. Until incentives driving program implementation recently, the compliance approach was greeted * Identifying the existing vehicles for with skepticism outside the United States. knowledge building and dissemination of good Critics argued that efforts to implement those practices techniques would fail in other business cultures. * Creating case studies of companies as a Skeptics also questioned the effectiveness of knowledge base of best practices. company anticorruption programs-a view East Asia proved a unique area on which to reflected in the poor ratings of U.S. exporters in focus. The diversity of origin of private sector the Bribe Payers Index, prepared by operators makes it a melting pot of business Transparency International. cultures. In the Chinese world, the traditional But such views have changed considerably network-based business practice of guanxi has since the late 1990s. Compliance systems are often been considered an obstacle to the now being implemented, with various degrees adoption of rule-based systems. Yet at the same of sophistication, by companies in high-income time, the emergence of large East Asian [Excerpted from Fighting Corruption in East Asia: Solutions from the Private Sector by Jean Francois Arvis & Ronald E. Berenbeim (Washington, D.C.: World Bank, 2003), pp. xviii-xxiii).] corporations engaged in regional and global enforcement agencies such as the Securities and activities is providing an impetus toward the Exchange Commission (SEC) and private firms. In adoption of global standards in management. recent years such a partnership approach to enforcement, extending help and incentives to EXTERNAL; AND INTERNAL INCENTIVES firms, has gained wide acceptance. Among the good examples to be found in East Asia is Hong Prohibition of bribery is universal, but the most Kong's Independent Commission Against far-reaching measures are those that address Corruption. firm behavior outside the home country. Under Increasing legal pressure does not fully z the U.S. Foreign Corrupt Practices Act (FCPA), account for companies' motivation to establish o U.S. companies can be prosecuted for engaging anticorruption programs. Anticorruption in corrupt practices outside the United States. programs are also driven by forces within firms. The Convention on Combating Bribery of A growing number of companies do business in Foreign Public Officials in International Business complex political and cultural environments, Transactions, adopted in 1997 by the subjecting them to greater scrutiny from civil Organisation for Economic Co-operation and society and nongovernmental organizations Development (OECD), has so far been ratified (NGOs). Indeed, ethics is a core component of by 35 countries, including five non-OECD the broader agenda of corporate social members in emerging economies (but none in responsibility that is gaining wide support at Asia). The Anti-Bribery Convention embraces the global level from large multinational and codifies the FCPA's extraterritoriality corporations, NGOs, and international principle, essentially putting transnational and organizations such as the OECD and the United national bribery on the same footing. The Nations. convention also contains provisions that will In addition, companies now realize that z ultimately drive a convergence of national turning a blind eye to corruption outside the anticorruption regimes worldwide. company breeds poor ethics within the The OECD Convention targets not only direct company and increases the risk of internal payments but also third-party payments-a main fraud. Thus, a compliance system is often part - channel of corruption. Because the convention of comprehensive risk management efforts that o makes companies liable for the behavior of their encompass internal and external corruption. branches and affiliates and, to a significant Companies in emerging markets that desire a degree, for the conduct of their business global reach are beginning to adopt a similar partners, it encourages companies to put in place approach. (There is quantitative evidence that thorough and global compliance mechanisms more transparent companies have better access F- and to implement local ethics programs that to capital markets.) For smaller firms and include intermediaries and suppliers. Another intermediaries, awareness of business ethics and important feature of the convention that is minimum standards of compliance will prove a reflected in corporate codes is a focus on grand condition for engaging in business with larger corruption. Taking a pragmatic approach, the corporations. FCPA and the OECD Convention tolerate petty corruption such as facilitation payments (small COMPONENTS OF AN EFFECTIVE amounts paid to "get things done"). PROGRAM Although a legal instrument such as the FCPA prohibits certain conduct, at home or abroad, it Basic compliance systems often require does not offer companies incentives for significant adaptation, but they are much the developing compliance systems, and the same in companies around the world. probability of getting caught is rather low. In Anticorruption programs in companies from all 1991 the U.S. government issued Organizational sectors and regions share three components: a Sentencing Guidelines, thus giving companies clear statement of values strongly supported by the carrot needed to encourage development of top management; training and dissemination sophisticated compliance systems. The guidelines grounded in the experience of company staff; allow for much lower fines and penalties if it can and effective information and support systems. be established that a company had an effective Although research does not support claims compliance system and that any unlawful activity that compliance systems encounter serious was the work of a rogue employee rather than cultural resistance, culture does raise a major an established company practice. This approach implementation issue. The challenge for resulted in a fruitful dialogue between companies is to formulate core principles and implement credible procedures adapted to experience have found successful warning ND local business cultures. In particular, for systems in most regions and industries, companies operating in industries with indicating that generalizations about the substantial local ownership (as is common in unwillingness of people in certain cultures to China), the need to adapt training, use these systems, for fear of being be seen as z dissemination, and information processes to "informers," are vastly overstated. A country Z local customs is more than an intellectual manager based in China confirmed this finding: exercise. "We have a reasonable utilization of whistle-blowing in China. The volume of x Values complaints may not be as high as in the United 7 Ethics programs that respond to risk States, but we do get them. And roughly 40 management needs are part of an inclusive percent of the informants identify themselves." z process that draws on a company's collective Resistance to whistle-blowing may be more intelligence and experience. Employees from rooted in the culture of the company than in all regions, businesses, and job categories that of the country in which the firm is doing participate in surveys, discussions, and focus business. Most warning-system hotlines evolve groups to formulate values statements and from an initial stage in which employees call in > warning systems. For example, in carrying out with every kind of complaint, to a phase in its most recent code-drafting process, Merck which legitimate irregularities are discovered, surveyed 22 percent of its workforce. As part to a final stage in which callers seek advice and of this dynamic process, each component is in obtaining it are counseled on how to avoid c periodically reviewed for relevance and bad decisions. assessed for effectiveness. Societe G6nerale de Surveillance mobilized its workforce to Are Ethics Programs Effective? z develop a program and conducted training Company spokespeople say that their ethics sessions in more than 20 languages. programs work. They cite records of Company leaders should be actively participation in training programs, as well as involved in values formulation. Board members surveys confirming employee interest and H and managers must participate visibly in code involvement in these discussions. An even drafting and program design. more important measure may be the use of . hotlines. A large volume of relevant, serious ; Training and Dissemination complaints is a positive sign. But company > Consistent with the view that every employee's spokespeople say that the ultimate indicator H conduct exposes a company to risk, most of success is heavy user reliance on the compliance programs now require that all complaint process for advice rather than to employees-not just managers-have some report infractions requiring remedial action. familiarity with company codes and practices Whether these programs are successful or and discuss their practical application. Senior not, companies are under growing pressure executives and employees involved in critical to assume more responsibility for compliance. functions such as sales or procurement Using incentives to encourage typically receive more extensive training. self-monitoring is potentially more Case studies, often drawing on a company's cost-effective and cost-efficient than experience, are invariably part of ethics sanctions-based public enforcement. program discussions. Not surprisingly, the most Self-monitoring is especially useful in the debated issue is the fine line between bribes many countries with limited resources for law and facilitation payments. Sometimes at a enforcement. company's insistence, and increasingly at their More difficult to assess is the impact of own request, suppliers and joint-venture self-monitoring on anticorruption policies in partners engage in these discussions. Companies host countries. There is evidence of strongly prefer to use their own senior companies losing business as a result of a executives as trainers. Where consultants are strict stand on corruption. But there are also involved, it is often to train the trainers. cases in which adherence to principles delivers rewards: for example, a telecom Information and Support Systems company regained lost business when Of the three components of ethics systems, political upheaval in an East Asia country warning systems encounter the most cultural voided corrupt deals entered into by a resistance. But research and company previous administration. H ~~~~INTERNAL CONTROL AND ZO exposure have been key factors in the recent GOVERNANCE proliferation of ethics programs in Japan Practitioners recognize the link between good through the Business Ethics Research Center corporate governance and effective (BERC). Similarly, the Federation of Korean anticorruption programs. The East Asian Industries designed its program model by financial crisis of 1997 showed that weak benchmarking other experiences. The corporate governance could result in development of guidelines and standards, such widespread, damaging corruption. The increase as the Transparency International/Social in anticorruption programs in the private sector Accountability International principles for z coincides with the recent global focus on countering bribery, might play a useful role in o proper accounting and auditing practices and the future, as could the emerging commercial on corporate governance. Increasingly, services that assess or score the transparency corporate governance guidelines refer to and compliance of corporations. > compliance systems. Large multinational and regional At the operational level, this link is corporations also play a direct role. Jardine straightforward. Because bribery is universally Matheson in Hong Kong (China) is imposing prohibited, it requires "creative" accounting strict ethical requirements on its suppliers. and dissimulation that are incompatible with Merck's Korean branch has been instrumental in modern accounting and disclosure standards promoting a code for that country's applicable to both listed and nonlisted pharmaceutical industry. Transparent Agents corporations. The core principle of transparency and Contracting Entities (TRACE), a recently is explicitly recognized in the OECD created network of large corporations that Anti-Bribery Convention. includes a huge Asian participation, targets Surveys conducted by the Conference Board intermediaries and suppliers to raise their since the mid-1980s have shown, in every awareness and help them develop appropriate region, steadily increasing involvement by procedures. boards of directors and audit committees in the Anticorruption dissemination efforts can also formulation and delivery of ethics programs. build on existing networks, such as those of the - For example, a 1987 survey found that 21 institutes of corporate directors and institutes percent of company boards played a role in of accountants in many East Asian countries, ethics programs; by 1999, the figure was 78 that are dedicated to promoting good percent. Almost one-third of the companies corporate governance in emerging markets. responding to the most recent survey cited Capacity building is needed, through "heavy" board participation. Not surprisingly, knowledge building at the local level (a case studies show that good corporate function carried out in Japan by BERC) and at governance of affiliates is crucial for effective the global level by organizations such as the anticorruption programs in large corporations- Conference Board, and by way of education of particularly, those operating through joint future leaders (through business schools). ventures. Public policies increasingly catalyze best practices in the private sector. Regulators such BUILDING AND DISSEMINATING as the U.S. Securities and Exchange Commission KNOWLEDGE OF GOOD PRACTICES and the Independent Commission Against Corruption in Hong Kong already play this role. Benchmarking and experience sharing are Combining legislation or regulations with primary mechanisms for disseminating best incentives for internal systems is a pragmatic practices. This kind of information sharing is way of reducing the supply side of corruption also used to establish commitment among by leveraging the public sector's often scarce industries, countries, and regions. Associations enforcement resources. of motivated executives with international l~~~~~~~~1 0 I w-S - 0 K-i 6 . 0 . ,.~~~~- /_ --- I^ .. t T ', :-_ H~~~~~~~~~ il111 +. * '1: V e i ** _~~~~~~~~~~~~ L iw | | 8 8 t :~~~~~~~~~~~~~~~~ @ e . . . ,-,. e .s g .~~~~~~~~~~~~ - i~~~~~- i-- 0 :A~~~~~~~ - h-.' 1s' ', ,, Fs-$ -,.,6 .:; - . - H. -~~~ © World Bank. Eric Miller, 2002 FOR ALL YOUR GLOBAL SOCIAL AND ECONOMIC DATA NEEDS GLOBAL DEVELOPMENT FINANCE 2004: WORLD DEVELOPMENT INDICATORS 2004 HARNESSING CYCLICAL GAINS FOR DEVELOPMENT An indispensable reference tool, the World 1 1 With analysis spanning the range of flows from p e 1Ov '- Development Indicators 2004 allows you to sophisticated market transactions to emergency aid, Global V lce consult over 80 tables and over 800 social and Development Finance isunique inits breadth of coverage \ economic indicators for 152 economies and 14 of the issues related to international development finance. country groups. The report also presents data Volume I contains the World Bank's annual review of recent based on six themes: World View, People, trends in financial flows to developing countries. 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Individual annual subscription: US$100 (www worldbank.org/online) Individual annual subscription: US$400 (www.worldbank.org/online) Institutional subscription: Please contact pubrights©worldbank.org Institutional subscription: Please contact [email protected] for for pricing information and to organize a free trial. pricing information and to organize afree trial. Toorder www.worldbank.org/publications World Bank Publcat ons P.O.BSx 960, Herndon, VA20172-0960, USA Tel703-661-1 580or 800-645-7247, Fax703-661-1501 Geograph c discounts app y. Please visit http //publications.werldbank org/discounts to see if you qualify for a discount Avai able at better bookstores WORLD BANK Publications * - 0 0 4- 0 * 0 * - 0 0 0 * 0 0 0 0 0 0 0 0 * 0 13. HIV/AIDS AND EDUCATION "AIDS is turning back the clock on Z development. In too many countries the gains in life expectancy won are being wiped out. In too many countries more teachers are dying each week than can be trained. We will mainstream AIDS in H all World Bank work." James D. Wolfensohn, president of the World Bank, address to the United Nations Security Council, January 2000 T_he education of children and youth merits the highest priority in a world afflicted by v HIV/AIDS. This is because a good basic -.... / education ranks among the most effective-and " - cost-effective-means of HIV prevention. It also . . - I merits priority because the very education ,I system that supplies a nation's future is being u I gravely threatened by the epidemic, particularly . , in areas of high or rising HIV prevalence. Thus , countries face an urgent need to strengthen ! their education systems, which offer a window l l of hope unlike any other for escaping the grip of HIV/AIDS. Vigorous pursuit of Education for All (EFA) goals is imperative, along with education aimed at HIV prevention. AIDS DESTROYS The scale of the AIDS epidemic is enormous. By i.i the end of 2001, over 40 million people were living with HIV/AIDS (UNAIDS 2001), nearly 25 . million people had died of AIDS, and more than 2 15.6 million children under the age of 15 had lost their mother or both parents (U.S. Census Bureau 2000 estimates). As well as the human tragedy, the epidemic has a profound impact on " growth and poverty: the United Nations Programme on HIV/AIDS (UNAIDS) estimates a the deadliest, but no part of the world is loss of more than 20 percent of gross domestic immune. The epidemic is on the upswing product in the worst-affected countries by globally, spreading fastest in Eastern Europe, 2020. but also rising in the Caribbean. Data from Asia The epidemic's grip on Africa has been by far warn against complacency: national prevalence [Excerpted, with changes, from Education and HIV/AIDS: A Window of Hope (Washington, D.C.: World Bank, 2003), pp. xv-xxiii]. z rates are currently low, but in some countries women lowers fertility by about 10 L4 are similar to those in West Africa that are now percent, while one or two years of recognized to be at the beginning of an schooling for mothers reduces child epidemic, while India is second only to South mortality by 15 percent. Africa in the number of people currently * Education is a proven means to prevent infected (UNAIDS 2001). HIV/AIDS. > Most devastating and far-reaching, perhaps, , It has been proven to provide is the epidemic's impact on education systems. protection against HIV infection. A HIV/AIDS is draining the supply of education, general basic education has an eroding its quality, weakening demand and important preventive impact. It can o access, drying up countries' pools of skilled equip children and youth to make workers, and increasing the sector's costs. The healthy decisions concerning their own full scope of the epidemic's impact on lives, bring about long-term healthy education becomes apparent when viewed in behaviors, and give people the - the context of the formidable challenges opportunity for economic already confronting the sector. More than 113 independence and hope. million school-age children are out of school in It is among the most powerful tools for developing countries, two-thirds of them girls. reducing girls' vulnerability. Girls' Of those who enter school, one out of four education can go far in slowing and drops out before attaining literacy. At least 55 reversing the spread of HIV by of the poorest countries seem unlikely to contributing to female economic achieve EFA by 2015, and 31 of these countries independence, delayed marriage, are also among the 36 worst-affected by family planning, and work outside the HIV/AIDS. home. z The time for business-as-usual is past. No , It offers a ready-made infrastructure country can afford not to act. The for delivering HIVIAIDS prevention worst-affected countries need to arrest the efforts to large numbers of the epidemic's ravages and protect future uninfected population- generations, while low-prevalence countries schoolchildren-as well as youth, who need to recognize the speed with which in many countries are the age group complacency can lead to crisis and the most at risk. tremendous opportunity for saving lives and , It is highly cost-effective as a financial resources through prevention. prevention mechanism, because the school system brings together students, sH EDUCATION MATTERS teachers, parents, and the community, and preventing AIDS through Countries need to accelerate their efforts education avoids the major toward achieving EFA goals, both because of AIDS-related costs of health care and the importance of education for a country's additional education supply. viability and because of the critical role it can Full speed ahead on EFA goals is vital. A play in preventing HIV/AIDS. Prioritizing general basic education-and not merely education is crucial for the following reasons: instruction on prevention-is among the strongest weapons against the HIV/AIDS * Education is a major engine of economic and epidemic. An urgent, strategic, and social development. education-centered response by countries and , It drives a country's future. Economic their partners is of utmost importance. prosperity and the reduction of global poverty cannot be accomplished unless HIV/AIDS HAS A DIRECT IMPACT ON all children in all countries have access THE EDUCATION SECTOR to, and can complete, a primary education of adequate quality. HIV/AIDS has an impact on the supply of It is pivotal to the achievement of education. While reliable data are limited, there several of the Millennium Development is little doubt that the epidemic is seriously Goals, adopted unanimously by 189 damaging the quantity and quality of countries in September 2000. Education education. Africa in particular appears to be has powerful poverty-reducing experiencing sharp increases in mortality rates synergies: one year of schooling for among teachers and administrators at all levels I -1s . - _ of education. Even where teachers are present, countries by about one-third. they may be sick and ineffective, or poorly HlV/AIDS increases education sector costs. On qualified as schools either make do with the supply side, budgets are having to whoever is available, or cut corners on training. accommodate higher teacher hiring and There is also an impact on the demand for training costs to replace teachers who have died education. For most countries, increases in the of AIDS, as well as the payment of full salaries school-age population are expected. While the to sick teachers who are absent and additional school-age population will be smaller than in salary costs for substitute teachers. Zambia has the absence of AIDS, it will nonetheless estimated the epidemic's financial burden on continue to grow. Estimates by the U.S. Bureau the supply of teachers to amount to some of Census suggest that only 6 of the 26 US$25 million between 2000 and 2010, and countries worst affected by AIDS will show an Mozambique's estimate is about twice as much. actual reduction in the school-age population Neither estimate includes demand-side costs, by 201 5. In some countries, but not all, there is yet efforts to reach orphans and other evidence of lower enrollment and higher vulnerable children are a rapidly growing new dropout rates among orphans, perhaps expenditure, especially in the worst-affected particularly at the secondary and tertiary levels. countries. Although the evidence is still unclear, the epidemic may reduce girls' access to education COUNTRY RESPONSES: PROMISING at all levels. Girls are highly vulnerable to DIREt:TIONS contracting AIDS because of social, cultural, t economic, and physiological reasons, and This section offers useful input to compared with boys are more often retained at decisionmakers faced with the responsibility for home. taking urgent action. It puts forward a set of The World Bank has estimated the cost of promising directions that could make up such a achieving EFA by 2015 in low-income countries. response, informed by a review of country As part of these analyses, a preliminary estimate experience to date. has been made of the additional costs of achieving EFA that might be attributable to the *Pursuit of EFA goals. Providing a basic impact of HIV/AIDS on education systems. education to children-while ensuring equal HIV/AIDS is estimated to add between US$450 opportunities for girls-is among the most million and US$550 million per year (at U.S. promising directions in responding to the dollar values for 2000, depending on other AIDS epidemic. Supporting children, assumptions in the model) to the cost of especially girls, to complete their secondary achieving EFA in the 33 African countries education is also a powerful tool in studied. This implies that HlV/AIDS increases the mitigating the circumstances that put youth total EFA external financing gap for these at risk. Countries that have emphasized access as well as the quality of learning and sector HIV/AIDS prevention activities and sought innovative responses to promote community support by using long-standing constraints have seen the communication strategies to reach large greatest advances. numbers of people through multiple o * Strategic planning. Projecting the future channels: prime time television series, radio needs of the education sector is an essential dramas, booklets, and other materials. part of education planning. For the * Partnership. The success of the approaches worst-affected countries there is an described here depends heavily on strong immediate need to protect and replace collaboration and partnership across sectors, z teachers; for all countries there is a across stakeholders within a country o longer-term need to ensure the stability and (communities, families, government, the quality of supply. private sector, and nongovernmental U School-based prevention programs. organizations), and with and across Reproductive health programs begin in international agencies. _ primary schools, with the aim of reaching students before they begin sexual activity, STRATEGY FOR ACTION but must continue through all levels of education. The Focusing Resources on A broad strategic response rooted in Effective School Health (FRESH) framework, education-and set within a national, which aims to focus resources on effective multisectoral context-is essential for all school health, was created by a partnership countries. Responses to the HIV/AIDS epidemic among the United Nations Educational, have too often been piecemeal, small-scale, Scientific, and Cultural Organization; the health-focused, and weakly integrated into World Health Organization; the United related efforts. Strong political commitment is Nations Children's Fund; the World Bank; and key to addressing such shortcomings. z others to provide a unified approach to Particularly in low-prevalence countries, school health. governments will need to recognize early on U Skills-based health education. Information that complacency can be disastrous. The about sex and HIV is insufficient by itself to following four elements are central to an bring about low-risk behaviors, but must be effective strategy: linked with the development of o interpersonal and other skills, such as critical * Define objectives and targeted outcomes. and creative thinking, decisionmaking, and The starting point for an effective response is self-awareness, as well as with the thus the affirmation of EFA goals and the development of the knowledge, attitudes, express recognition that the education sector H and values needed to make sound could be fortified to become a country's health-related decisions. strongest weapon against HIV/AIDS, or, * Peer education and focus on youth. A failing that, its worst victim, reversing powerful means to influence youth, peer decades of hard-won gains. Ensuring that education by respected students or other children, especially girls, complete their youth of the same age can help develop secondary education is key to mitigating the healthy behaviors and practices. circumstances that place youth at risk. * Support for orphans and out-of-school Equally important is the need to establish youth. The burgeoning numbers of these key outcomes that can be monitored. disadvantaged children, and the lack of * Expand the knowledge base. A prerequisite understanding of the constraints on their for effective action is an adequate education, pose an enormous new challenge knowledge base to inform the development for which no tested solutions are available. of immediate and long-term responses. The combination of little experience and Success will hinge on a strategy tailored to weak data is potentially explosive and national circumstances. This step involves urgently needs attention. Innovation, estimating the impact of HIV/AIDS on cross-sectoral efforts, and information education supply and demand, and on sharing to learn lessons quickly are essential prospects for achieving EFA goals. to ensure that these children obtain a basic * Identify appropriate actions, informed by a education. stocktaking process. This paper urges * Multimedia campaigns. Countries can create countries to vigorously pursue national support for and understanding of education education goals, fully integrating an AIDS response into such efforts. It urges the HIV/AIDS prevention. Countries drive this development of a country-specific action process by preparing nationally owned program comprising measures drawn from a development strategies, articulated in Poverty - menu of promising approaches. Priorities of Reduction Strategy Papers. universal relevance are educating girls, The broad principles that underlie all Bank delivering prevention messages to teachers support for education are as follows: and students at all levels, and ensuring that C the supply of education is adequate in * Scaling up successful approaches. The Bank is quality and quantity in relation to expected working with partners to support countries demand. throughout Africa in assessing the impact of * Find resources for financing actions. HIV/AIDS on their education systems and Obtaining resources-whether from private planning an appropriate response using the investors, donors, or public sector Education and HIV/AIDS (Ed-SIDA/AIDS) allocation-entails competing for them. approach, and to implement skills-based Countries will have to establish not only that school health programs based on the FRESH need exists, but also that resources are being framework. effectively used and producing results. Policy * Mobilizing resources. The Bank is reinforcing reforms aimed at improving educational political commitment for EFA, both as an end quality-and that help keep children in in itself and as an important weapon in school-also serve to substantially lower fighting AIDS. There is a need to increase countries' costs of achieving EFA and both the overall level of external support preventing HIV/AIDS. and the share of resources allocated to education. THE WORLD BANK'S ROLE , The Bank is currently financing 143 education projects implemented in 78 The World Bank is a long-standing partner in countries, reflecting investments of the efforts of the poorest countries to educate US$9.7 billion. During the last five their people, and is the largest external source years, new commitments for girls' of financing for education and for HIV/AIDS education projects have averaged activities worldwide. The Bank is committed to nearly 60 percent of total primary and supporting the world in an education-centered secondary education lending. The Bank fight against AIDS, an objective that resonates supports countries in modifying strongly with its mission of poverty reduction. existing projects and in ensuring that This fits squarely within the Bank's strategic new EFA and girls' education projects framework, which emphasizes support for include a specific response to HIV/AIDS investment in people and progress toward the wherever relevant. All social sector Millennium Development Goals. projects may support education, and The Bank's work in education is centered on there is a specific aim to increase two priorities. The first is EFA, which includes support for orphans and other the objectives of universal primary education vulnerable children. and gender equity in schooling. Second, the , Debt relief under the Heavily Indebted Bank's strategy for education recognizes that Poor Countries Initiative is a landmark EFA is a first step along the continuum of effort, carried out jointly with the lifelong learning to provide education for the International Monetary Fund, to knowledge economy, which is crucial to the mobilize global resources for some of development of skills and competencies that the world's poorest countries. A total will strengthen national competitiveness in the of US$36 billion in debt savings has global arena. been committed to 24 countries, where An urgent challenge is to integrate HIV/AIDS social spending is now projected to issues into the Bank's dual-focused support, as increase by some US$2.2 billion per has most recently voiced by the Group of Eight year. Early indications are that some 40 Task Force on Education, established in 2001 to percent of these extra resources will be accelerate progress on EFA. For the Bank, this directed to education and 25 percent directive implies helping countries to pursue to health. overall education goals more vigorously while , The multisectoral Multicountry factoring in the epidemic's impact, and to HIV/AIDS Program for Africa has ensure adequate education aimed specifically at committed US$462.5 million to 12 resources for education, but in the overall z countries, and a similar initiative has level of support, commensurate with the ;4 made US$53.5 million available to importance of education. Second, the Bank e Caribbean countries. A multisectoral seeks to expand its work with partners to 3 tresponse is central to the strategy of provide training in the use of education ;these projects, and in the second phase planning tools such as the Ed-SIDA/AIDS of this approach, another US$500 model. Third, the Bank provides support for million is being made available and the building education sector capacity to collect role of the education sector is being data and analyze education statistics. given specific emphasis. * Working with strategic partners. The Bank is * Generating and sharing knowledge. The a founding member of UNAIDS and a Bank is helping countries to draw on member of the United Nations Interagency worldwide and regional best practice and to Working Group on schools and education, a vI~ undertake analytical work to ensure sound partnership that facilitates countries' approaches and effective use of resources, development of strategic plans for HIV/AIDS and is evaluating the impact of education prevention and impact management in H system approaches across several countries. education systems. The development and Expanding and consolidating Web-based implementation of the FRESH framework "gateways" is another priority. The Bank is and the Ed-SIDA/AIDS model are examples of also working with partners to develop a the importance of partnerships in the fight sourcebook that brings together best against AIDS. On EFA, the Bank is taking the practice on school-based prevention lead in working with various partners to methods. Urgent priorities include assessing analyze the policy and resource gaps for the impact of education responses to the meeting the goals and for assessing the AIDS epidemic and finding solutions to the impact of HIV/AIDS on the cost of achieving challenges orphans and other vulnerable EFA. children face. Promoting innovation. The Bank recognizes U Building capacity. Bank support covers three the need for innovative and flexible important areas in relation to capacity responses, in particular, for the building. First, the Bank helps ministries of worst-affected countries and the most education make the case-to national vulnerable groups, such as orphans and leaders, finance ministers, and the public- youth. for an increase, not only in the share of 41 L... ~ ~ m i XX o s~~~~4 14. REACHING THE RURAL POOR 'Today three out of every four of the world's poor live in z rural areas. There will be no success in the war on poverty unless we take the fight to where those people live. Yet, H over the last decade lending to rural development, and especially to agriculture, has been in unprecedented decline-both at the World Bank and among our development partners. This situation cannot continue. We must renew our focus on agriculture and rural > development. The new rural development strategyn presented in this document outlines our 'battle-plan' for 7 such a renewed focus, and our commitment to reverse the downward trend in rural lending." James D. Wolfenshohn, President, World Bank "HIV/AIDS is unequivocally the most devastating disease we have ever BOX 14.1 RECENT BANK OPERATIONS faced, and it will get worse before it "I RURAL AREAS gets better." Dr. Peter Piot, executive director of Rural investment is under-represented in the World UNAIDS, November 2001 Bank's lending. The Bank's lending to rural areas in Fiscal Years 1999-2001 amounted to a total of US$15 billion (about $5 billion annually). This represents around 25 percent of the Bank's total lending and therefore is not ore than a half century of persistent congruent with the greater incidence of poverty in rural efforts by the World Bank and others situation has not changed. The situation is particularly have not altered the stubborn reality acute for agricultural lending, which has declined of rural poverty, and the gap between rich and markedly over the past 20 years, both absolutely and as a proportion of total Bank lending. Of the US$5 billion poor is widening. Most of the world's poorest lending to rural areas in FY02, total investment in the people still live in rural areas and this will agriculture sector (including agro-industry and markets) continue for the foreseeable future. The day was US$1.5 billion. This equates to just 7.9 percent of total Bank lending, whereas in the early 1980s it when the goals for international development accounted for more than 30 percent. will be met is still far off in many parts of the world. The term "rural areas" as used throughout this Whti oe it lblzto , tpublication includes small and medium sized towns, What IS more, with globalization, the according to the national definitions. Investment in rural "poverty challenge is getting bigger and areas covers investments in all sectors (agriculture, harder," according to World Bank President natural resource management, rural transport, water James D. Wolfensohn. "Many of the benefits of and sanitation, telecommunications, education, health, an increasingly interconnected and interdependent global economy have bypassed the least developed countries, while some of development strategy launched in 1997, had a the risks-of financial instability, communicable decisive influence on global thinking-but disease, and environmental degradation-have disappointing results on the ground. In 2001 extracted a great price. lending for agricultural projects was the lowest in the World Bank's history (box 14.1). The new strategy, Reaching the Rural Poor, is FROM VISION TO PRACTICE: THE CASE results oriented. It stresses practice, FOR A REVITALIZED STRATEGY implementation, monitoring, and empowerment of the people it is designed to help. The strategy From Vision to Action, the Bank's previous rural responds to changes in: Note: Except where otherwise noted, the term "agriculture" includes all agriculturally related Bank activities (including agricultural adjustment, agricultural research and extension, agricultural credit, agro-industry and marketing, community based rural development, livestock, fisheries and aquaculture, forestry, agency reform, and perennial and annual crops). "Rural development" includes agriculture plus all other investment activities in the rural space, including natural resource management, rural transport, water and sanitation, telecommunications, education, health and other social services. "Rural space" refers to the geographic area, including small towns designated by each country as rural. z The global environment-changes brought about by the forces of globalization and 2 persistent trade distortions -2,7§ * Client countries-challenges of unfinished policy reforms, decentralization, X i institutional development, poor .. governance, the expanding roles of the private sector and civil society, and proliferating national and regional conflicts z * The World Bank-to apply the lessons _ learned in the past four to five years while '- implementing From Vision to Action. Work _ on Reaching the Rural Poor began in mid H I:IeXsEWIt¶IItJiF{Ol- 1 L POOR: THE CONSULTATIVE PROCESS More than 2,000 people (government officials, civil society, nongovernmental organizations, academics, private sector, and donor agencies) were involved in the consultations for the rural strategy. Consultations involved four major stages: Consultations on the regional strategies and the initial framework of the corporate strategy. Eleven z regional consultations were held in early 2001 1 Z ~~~~(Nepal, Philippines, China, Lebanon, France, Kenya, Senegal, Russia, Panama, Belgium, and Japan). Consultations and seminars focused on the corpo- was followed by intensive dialogs with rate strategy and its implementation. In 2002 a . . . series of consultations and seminars on implemen- individuals and with international, national, tation were held in countries including Vietnam, and local organizations. Nigeria, and Ethiopia and at regional development Reaching the Rural Poor also reflects and banks. reinforces the Bank's commitment to the UN Presentations, seminars and panel discussions at major international gatherings with broad-based Millennium Development Goals stakeholder participation. These venues included (www.developmentgoals.org), which will be =: the International Food Policy Research Institute met only through increases in rural incomes H 2020 Conference in 2001, and in 2002, the Food . . and Agriculture Organization Council Meeting, the and broadened opportunities for rural United Nations Conference on Financing for inhabitants. The strategy assigns great weight Development, the United Nations PrepComm for to developing, establishing, and supporting the World Summit on Sustainable Development, the European Sustainable Development appropriate Implementation and monitoring Conference, the 35th World Farmer Congress, the mechanisms and processes at the national, World Food Summit-Five Years Later, and the regional, and international levels. European Rural Development Forum. Rural strategy website and internet consultations on the final draft of the strategy. A website was THE KEY FEATURES OF REACHING THE created early in the strategy-development process with drafts and all relevant material posted for RURAL POOR comment. Numerous comments were received from academics, civil society groups, donors, gov- Reaching the Rural Poor wil revitalize World ernments, nongovernmental organizations, and Bank activities in rural areas by adjusting the private individuals. strategic framework and formulating a program of concrete and attainable actions. 2000. Starting with the development of The strategy calls for raising the profile of regional action plans and extensive rural development efforts and extending Bank consultations at the regional level, the new endeavors to reach the rural poor. The strategy was designed to respond to the strategy: local circumstances and needs of the people who have the greatest stake in its * Focuses on the rural poor implementation (box 14.2). Regionally * Fosters broad-based economic growth drafted strategies became the framework * Addresses rural areas comprehensively for the new corporate strategy. This process * Forges alliances of all stakeholders A Providing more than fifty years of service to Adult Education inLatin America and the Caribbean *Educational Research -Evaluation *Courses *Distance Education and Training *Educational Technologies *International Cooperation * Quality Education * Publications - *Infrastructure and Services Research on educational experiences related to development Citizenship and Participation Sustainable Development Bilingualism * Literacy Education for Peace Interculturalism Gender Equity Human Rights Rural Development j - Migration _K=1 AL~~~~~~~~~~~~~~ CREFAL REGIONAL COOPERATION CENTER FOR ADULT EDUCATION IN LATIN AMERICA AND THE CARIBBEAN Av. Lazaro Cardenas s/n, Col. Revolucion, C.P. 61609, Patzcuaro, Michoacan, Mexico Tel: 52 (434) 342-8112, Fax 342-8151, E-mail: [email protected] 7 - 7 =' - prmto is ante key feature. r 7~~~~~~~~~~~~~7~ ~ ~ ~ ~ ~ ~~~~~~~hi Focuin on th RrlPo X. _ ... - o ;* Addresses the impact of global recognizes the importance of nonfarm developments on client countries economic activities in rural development, so = ~~~~~~~~~~~~~~theirpromotion is another key feature. - Focusing on the Rural Poor fH Who are the rural poor? Where do they live? Addressing Rural Areas in Their Entirety What challenges does poverty pose in their To reduce rural poverty, the Bank must work respective localities? Answers to these questions with clients to address rural areas in their are the basis for an effective rural development entirety-all of rural society and every strategy. The rural poor include the landless, economic, social, and environmental aspect of individuals and households with few assets, rural development. Past approaches identified E lmtt^ smallholders, pastoralists, rural women (especially most pieces of the puzzle but failed to put women-headed households); ethnic minorities, them together in a way that attained and indigenous populations. The rural poor are objectives. Sustainable rural development not a homogeneous group. Understanding the requires multidisciplinary and pluralistic needs of such different groups is central to the approaches to poverty reduction, social and success of the Bank's new strategy. gender equity, local economic development, natural resource management, and good Fostering Broad-Based Economic Growth governance. The Bank is moving away from Reaching the Rural Poor makes broad-based short-term, sector-by-sector approaches and economic growth its primary objective. Rural toward coherent cross-sectoral approaches for poverty is as diverse as are the rural poor in the sustained reduction of rural poverty. their livelihood strategies, but in most of the While the poor have much in common with poorest developing countries agriculture is the each other wherever they live, rural areas are main source of rural economic growth. That is distinctly different from urban ones. For this why improved agricultural productivity and reason, the approaches in addressing the needs growth are central to the Bank's strategy for of the rural and the urban poor must be reducing poverty. At the same time, the Bank tailored specifically to each group. However, the AI~~~~~~~~~~~~~~~~~~~~~~~~~' ~~~ . in... ml/ , - -1- --- Palm oil is an ingredient of many foods. Or ~~~~~~Large-scale felling of tropical forest is being carried out to make way for the cultivation of palm oil. The destruction is dramatic, as demand for palm oil is rising. Migros has acted and converted to sustainable palm oil. It helps to halt the destruction of the tropical forests with their plants and animals and to preserve the basis of life for many people. In cooperation with WWF Switzerland, Migros has drawn up the world's first criteria for sustainable production of palm oil. These include the conservation of forest areas but also stipulate environmentally friendly cultivation in the plantations and social working conditions. One essential element is cooperation with local NGOs *~~~~ ~~~~~and the local population. In 2002, M IG ROfl1JP S Migros was honoured in Johannesburg www.migros.ch for this pioneering move with a prize [email protected] for sustainable management. Bank's rural strategy recognizes that urban WHAT THE BANK NEEDS TO CHANGE and rural areas are inextricably linked in the process of development and that the strategy Enhancing bank-wide multi-sectoral - must take into account the diverse range of cooperation in the rural space. C interactions between urban and rural One of the greatest challenges will be to economies when crafting future development ensure that rural poverty is truly reflected in > efforts. As development progresses, all Bank-supported programs and operations in countries undergo a transition from a the manner and form envisaged in this predominantly rural to a more heavily urban strategy. Each level of the Bank decision z economy. Urban and rural areas are a making structure must become an integrated o continuum, but they are also internally part of the implementation process. This will heterogeneous. entail new and innovative relations between all Bank units active in rural areas. The > Forging Alliances of All Stakeholders implementation of this strategy also requires _ To broaden stakeholder participation in that operations in rural space are designed in project and program design and a multi-sectoral fashion and that self-standing implementation, the Bank is working with sectoral operations are coordinated within an clients to overcome the shortcomings of earlier overall strategy. Specific regional top-down, non-inclusive approaches. The Bank organizational arrangements are proposed to will work with others (governments, improve coordination of activities in the rural development agencies, civil society, private space and to achieve the strategy's objectives. sector, academia) in a broad-based global These arrangements would operate within the coalition to make the reduction of rural framework of existing management structures. poverty a major thrust for the coming decade. Through enhanced partnerships and other Improving the application of instruments. linkages, the development community will Addressing rural poverty in a comprehensive increase advocacy for rural development and fashion requires that an evolving set of share experiences in best practices and instruments, with the right focus, are applied to - innovation. Bank operations in rural areas. The balance between the different instruments is a complex Addressing the Impact of Global Developments implementation issue. There is clearly no one on Client Countries "golden rule" as to the optimal distribution The process of globalization has brought between different Bank instruments of about a "shrinkage" of spatial distance and a programmatic, adjustment or investment H lowering of transaction costs that has resulted lending, or between economic, social or natural in growing interdependence of the world's resource outcomes. Nevertheless, some general economies, markets, and people. Globalization directions for Bank operations in rural areas encompasses more open international trade in are: goods and financial services, growth of multinational companies, more uniform labor * The diversity of needs within rural areas and environmental standards, and growing between regions, countries, and sub-country global sourcing in supply chains. This regions requires the use of a broad set of expanded market in goods, services, and instruments supporting a number of sectoral information provides new opportunities for interventions, within the framework of the rural development and poverty reduction. But Country Assistance Strategies. globalization and economic liberalization carry * Traditional investment projects will continue risks as well as opportunities and create losers to play an important role, however they should be blended with the new type of as well as winners. Finding ways to harness the opao sc as th Leanin and growth opportunities while managing risks operations such as the Learning and and compensating losers is a challenge for policymakers everywhere. Reaching the Rural Loans, and the Poverty Reduction Support Credits, etc., according to country requests Poor reflects the World Bank's increased and new conditions; emphasis on helping countries meet these * The broader use of new instrument challenges, addressing global issues such as modalities, such as programmatic lending, international trade policy, subsidization of should be pursued after careful assessment agriculture, and global climate change. of lessons from field experience and assurance of an adequate rural focus. Improving linkages to development partners. rural poverty. Reaching the Rural Poor pays There is growing consensus among close attention to monitoring and evaluation of international development partners-including strategy implementation. The targets and the Bank, FAO, IFAD, EC, regional development benchmarks will be used against the current banks, and major bilateral agencies-that baseline for evaluating progress over a national and global poverty reduction targets five-year period. The Implementation z will not be met unless poverty in rural areas is Monitoring framework is designed around reduced. Understanding what it takes to meet results-based management principles, expressed the needs of the rural poor has never been as inputs, outputs, outcomes, and impacts. The closer, as many agencies have recently taken Bank's Agriculture and Rural Development stock of their experiences and redefined their Sector Board will work closely with senior Bank approaches and commitments to poverty management to ensure alignment of the rural reduction in rural areas. The further strategy implementation framework with development of relations with international emerging Bank work on results-based partners aimed at improving the distribution of management. labor among the various partners is based on Several risks are inherent in implementing the Bank's and the partner's specific the strategy. Some of these depend on events comparative advantages. Coordinated support that are beyond the control of the Bank and of to client countries for the development of the countries concerned. The main risks national rural development strategies, in perceived are: conjunction with Poverty Reduction Strategies and Country Assistance Strategies, will be a * Not all sectors operating in rural areas take major focus of the Bank's interactions with up the challenge of rural poverty reduction. international partners. * The necessary institutional arrangements, incentives framework, and appropriate staff Improving linkages to the private sector and civil skills mix are not addressed. society. * The opportunities do not materialize for the Increasing links and improving relationships institutional learning and innovation that are with the private sector and civil society within a expected to emerge in the context of a country framework are among the top priorities sharpened focus on programmatic lending for the Bank in each region. The Bank's links to operations. representatives of civil society and * The Bank, its country partners, and other nongovernmental organizations have increased stakeholders cannot mobilize country buy-in dramatically over the past ten years. Internet to intensifying emphasis on attacking rural websites and information sharing now provide poverty. the opportunity for increased direct dialogue * The client countries do not achieve and interaction between the Bank and NGOs. long-term growth and do not address issues The consultation process on regional action related to enhanced and more equitable plans and the new corporate framework for the access to assets for all. rural strategy proved to be a valuable and productive means of enhancing relationships The successful implementation of the new with both large numbers of NGOs as well as strategy is a challenge for both the Bank and with the private sector across all regions. In a for its clients and partners. The Bank recognizes rapidly globalizing world, links with that it cannot work alone. It will deepen multinational companies that have an impact relationships with client countries, strengthen on rural development are also essential. existing alliances and forge new ones with other development partners, the private sector Monitoring Implementation Progress and and organizations of civil society to broaden Managing Risks. the understanding of rural development issues, This strategy presents a program for revitalizing share experiences, build capacity, and mobilize Bank activities in rural areas and increasing the the necessary resources to overcome rural effectiveness of the Bank's work in reducing poverty. IMTA I (X /iVNSTJTUfLIT 4,IEXICAM/4 // \MW DE TECA'OLOGIA DEL A GLIA XIlIater isa complex issue. Its usE, nagement, and sanitation represent enormous technical, omic, social, and political challenges. At the Mexican Institute of l1V Technology we take an interdisciplinary approach to 5v -related problem solving. Our highly qualified experts no4 ly deal with the technical aspects of water by offering i vative solutions, but also w provide social-oriented program d services. k \S~" IMTA... because it's about time we changed the way we deal with water. Instituto Mexicano de Tecnologia del Agua Phone: +52 (777) 329 36 00 ext. 114 Paseo Cuauhnahuac 8532 Fax: +52 (777) 329 36 73 Progreso, Jiutepec, Morelos [email protected] 62550, Mexico www.imta.mx 15. THE IMPORTANCE OF LAND POLICIES m and is a key asset for the rural and urban poor. It provides a foundation for economic activity and the functioning of market (for example, credit) and nonmarket institutions (for instance, local governments and social networks) in many developing countries. - Given this importance, institutions dealing with land have evolved over long periods, and land_ policies will invariably be affected by the presencePolicy advice of multiple that is oblivious market imperfections.of either the 7 complexity of these issues or the historical and - - political repercussions of policy interventions in,;- -- this area can lead to unintended negative . , . consequences. Research has long pointed to the o . need for a careful and differentiated approach 4 - as a precondition for making clear policy recommendations in relation to land that can help improve both efficiency and equity. Frequently, however, this message does not seem to have been clearly communicated to , policy analysts and decisionmakers, with X negative consequences. This paper aims toi . .. summarize key insights from research and - practical experience, not only to highlight the importance of careful and nuanced policy * advice, but also to illustrate some general ', principles for formulating such policy advice in specific country settings. advances. In the course of development virtually everywhere, the need to sustain larger ORIGINS AND EVOLUTION OF populations or to make use of economic PROPERTY RIGHTS opportunities associated with trade will require investments in land that cultivators will be more Understanding the origins of property rights likely to make if land rights are secure. and their evolution over time is important to Appropriate institutional innovations to provide appreciate how property rights to land affect such rights can lead to a virtuous cycle of households' behavior and can, in turn, be increasing population and successively greater influenced by government policy. Historically, investment in land, economic growth, and one reason property rights evolved was to increased welfare. At the same time, failure of respond to increased payoffs from investment the institutions administering land rights to in more intensive use of land resulting from respond to these demands can lead to land population growth or opportunities arising grabbing, conflict, and resource dissipation from greater market integration and technical that, in extreme circumstances, can undermine [Excerpted, with changes, from Land Policies for Growth and Poverty Reduction (Washington, D.C.: World Bank, 2003), pp. xvii-xlvi]. z societies' productive and economic potential. known that in unmechanized agriculture, the In addition to this evolutionary perspective, operational distribution of land affects output, the imposition of property rights to land by implying that a highly unequal land distribution outside forces or local overlords has affected will reduce productivity. Even though the ability _ the nature of such rights in many countries of to make productive use of land will depend on the developing world. The goal of such policies in areas beyond land policy that may , intervention was to obtain surpluses from local warrant separate attention, secure and smallholder populations or to force well-defined land rights are key for households' independent smallholders into wage labor by asset ownership, productive development, and z preventing them from acquiring independent factor market functioning. o land rights. To do so, a variety of mechanisms, If property rights are poorly defined or .r often supported by distortions in other markets, cannot be enforced at low cost, individuals and was used. Not surprisingly, such imposition of entrepreneurs will be compelled to spend rights often disrupted the evolution of land valuable resources on defending their land, rights as a response to population growth or thereby diverting effort from other purposes has, by co-opting local institutions or changing such as investment. Secure land tenure also how they functioned, implied vast changes in facilitates the transfer of land at low cost the way land was allocated and managed at the through rentals and sales, improving the local level. allocation of land while at the same time Given that the historical evolution of supporting the development of financial property rights is not only a response to purely markets. Without secure rights, landowners are economic forces, it is not surprising that the less willing to rent out their land, which may arrangements found in many countries are impede their ability and willingness to engage often not optimal from either an economic or a in nonagricultural employment or rural-urban z social perspective. For example, in Africa, the migration. vast majority of the land area is operated under Poorly designed land market interventions customary tenure arrangements that, until very and the regulation of such markets by large recently, were not even recognized by the state and often corrupt bureaucracies continue to and therefore remained outside the realm of hamper small enterprise startups and nonfarm the law. In Eastern Europe, collective economic development in many parts of the production structures have failed to contribute world. Such interventions not only limit access to rural growth. In Latin America and parts of to land by the landless and poor in rural and Asia, highly unequal land ownership and access urban areas of the developing world, but by to assets have made it difficult to establish discouraging renting out by landlords who are H inclusive patterns of growth. As a consequence, thus unable to make the most productive use of there is concern that in many of these countries their land, they also reduce productivity and economic growth may widen pre-existing investment. High transaction costs in land inequalities and tensions rather than reduce markets either make it more difficult to provide them. Despite such shortcomings, socially credit or require costly development of suboptimal and economically inefficient collateral substitutes, both of which constrain property rights arrangements have often development of the private sector. A recent remained in place for long periods of time. In study estimates that in India, such land market fact, far-reaching changes of land relations distortions reduce the annual rate of gross have generally been confined to major historic domestic product growth by about 1.3 percent. transitions. ROLE OF SECURE PROPERTY RIGHTS IN IMPORTANCE OF PROPERTY RIGHTS POVERTY REDUCTION FOR ECONOMIC GROWTH For most of the poor in developing countries, Property rights affect economic growth in a land is the primary means for generating a number of ways. First, secure property rights livelihood and a main vehicle for investing, will increase the incentives of households and accumulating wealth, and transferring it individuals to invest, and often will also provide between generations. Land is also a key them with better credit access, something that element of household wealth. For example, in will not only help them make such investments, Uganda land constitutes between 50 and 60 but will also provide an insurance substitute in percent of the asset endowment of the poorest the event of shocks. Second, it has long been households. Because land comprises a large . H - z A~~~~~~~~~~~~~~~~~~~ C share of the asset portfolio of the poor in many Control of land is particularly important for developing countries, giving secure property women, whose asset ownership has been rights to land they already possess can greatly shown to affect spending, for instance, on girls' increase the net wealth of poor people. By education. Yet traditionally, women have been allowing them to make productive use of their disadvantaged in terms of land access. Ensuring labor, land ownership makes them less reliant that they are able to have secure rights to one on wage labor, thereby reducing their of the household's main assets will be critical in vulnerability to shocks. many respects. This includes meeting the Given the key role of land as a determinant of challenges arising in the context of the access to economic opportunities, the way in HIV/AIDS epidemic, where the absence of clear which land rights are defined, households and land rights can lead to costly conflict and entrepreneurs can obtain ownership or hardship regarding possible loss of land by possession of it, and conflicts pertaining to it are widows. resolved through formal or informal means will have far-reaching social and economic effects. IMPACT OF SECURE PROPERTY RIGHTS The implications not only influence the structure ON GOVERNANCE AND SUSTAINABLE of governance at the local level, but also affect (a) households' ability to produce for their DEVELOPMENT subsistence and to generate a marketable surplus, The ability of local leaders and authorities to (b) their social and economic status and often control land has traditionally been a major their collective identity, (c) their incentive to source of political and economic power. Over invest and to use land in a sustainable manner, and above the economic benefits that may be and (d) their ability to self-insure and/or to access derived from giving households greater tenure financial markets. For this reason, researchers and security, measures to increase households' and development practitioners have long recognized individuals' ability to control land will have a that providing poor people with access to land clear impact on empowering them, giving them and improving their ability to make effective use greater voice, and creating the basis for more of the land they occupy is central to reducing democratic and participatory local development. poverty and empowering poor people and For example, fiscal decentralization is often communities. hampered by the lack of own revenue and z accountability on the part of local governments. largely in terms of agricultural use and Both of these could be increased by taxation of productivity, devoting little attention to the land. In countries where land continues to be a importance of land rights for empowering the key productive asset, governments could use poor and improving local governance, the Z) land taxation more effectively to motivate fiscal development of the private sector outside discipline and to strengthen the voice of the agriculture, the gender and equity aspects local population by enhancing the associated with land, and the problems arising accountability of local officials. on marginal areas and at the interface between Conflicting interventions in land rights rural and urban areas. Review of the extent to z systems by outsiders in the course of history, or which the substantive messages have changed c a failure to establish legitimate institutions in since 1975 and the implications of this for the face of increasing population pressure and operational approaches can illustrate the appreciation of land values, have tended to challenges ahead as well as the scope for exclude the poor from land access and successfully addressing them. It is now widely _ ownership and resulted in the creation of realized that the almost exclusive focus on parallel or overlapping institutions. Therefore formal title in the 1975 paper was ensuring minimum standards for rapid conflict inappropriate, and that much greater attention resolution and dispensation of justice, to the legality and legitimacy of existing accountability, and transparency in land institutional arrangements will be required. management and access is critical. Where Indeed, issues of governance, conflict long-standing, systematic distortions in the area resolution, and corruption, which were hardly of land overlap with race and ethnicity issues, a recognized in the 1975 paper, are among the buildup of land-related conflict and violence key reasons why land is coming to the forefront can even result in collapse of the state, with of the discussion in many countries. While there z devastating consequences. In Africa, for are more opportunities for win-win solutions example, formal tenure covers only between 2 than may often be recognized, dealing with and 10 percent of the land. To avoid leaving the efficiency will not automatically also resolve all occupants of these lands effectively outside the equity issues. Stronger rights for women, as rule of law, many African countries have well as improving access to land by herders, recently given legal recognition to customary indigenous populations, and other groups that tenure as well as to the institutions were historically disadvantaged, can be justified administering it; however, implementing these on the basis of basic human rights laws remains a major challenge. considerations, even if they do not imply an In many countries the state continues to own immediate increase in economic efficiency. H a large portion of valuable land despite Another area where the policy evidence that this is conducive to recommendations of the earlier paper needs to mismanagement, underutilization of resources, be corrected is the uncritical emphasis on land and corruption. Broad and egalitarian asset sales, without being aware of the high ownership strengthens the voice of the poor, transaction costs and the many obstacles that who are otherwise often excluded from might impede the functioning of sales markets, political processes, allowing them greater especially for the poor. Transferability of land is participation that can not only increase the more important today than it was earlier, as transparency of institutions, but can also shift evidenced by the high incidence of rental the balance of public goods provision, especially markets and the role these markets play in at the local level. As appropriation of rents facilitating the development of an off-farm from land appreciation through discretionary sector. At the same time rental markets, whose bureaucratic interventions and controls remains outcomes in terms of equity, productivity, and a major source of corruption and a barrier to long-term investment are more beneficial than the startup of small enterprises in many had been assumed, can address nearly all developing countries, this can help to productivity concerns. Eliminating remaining significantly improve governance. restrictions on the functioning of these markets is of high priority. CHALLENGES AHEAD Land reform can be a viable investment in a country's future, but that to ensure that the The last public pronouncement by the World potential is fully utilized, there is a need to Bank on land issues was in the 1975 Land carefully assess the requirements and scope of Reform Policy Paper, which analyzed land this intervention as compared with others to J~~~~~~~~~~~~~ C- C determine both target groups and necessary cautious about offering policy advice and did complementary measures. The targeting and not confront the political dimension of land impact on poverty reduction, empowerment, directly. Few links between land and broader and productivity, as well as the cost of such a economic development were drawn that could program, need to be evaluated carefully and in have helped to integrate land issues with a a transparent and participatory way, explicitly long-term strategy that had broad support at allowing for modifications of program design in the country level, and little detail was offered response to results. on how the insights gained could be made There are many land-related interventions operational. As a consequence, the impact in with a clear poverty-reducing impact that are terms of implementation was limited. less controversial politically and less demanding Substantive policy advice has evolved in terms of institutional capacity and fiscal considerably since then, but the general resources. Initiating a program of land reform principles and recommendations derived from without at the same time exhausting these the Bank's more recent land policy research other options will not be prudent. Moreover, need to be translated into the local realities F" even where redistributive land reform is either prevailing in any specific setting. Doing so will not needed or is not politically feasible, much require not only an active policy dialogue, but can and may need to be done to improve land also the collaboration of all major stakeholders, rights and access by the poor. drawing on their respective comparative Not surprisingly, in view of the controversial advantage. nature of the subject, in 1975 the Bank was very o-V cA-~~ ~ ~ t- ~ ~~~~~~ ~ ~~~~~~~~~~~~~~~- -k -A ~ r p .Afl. -\ old ak.Sheza Noa i, w ,20\02Ws^ World Bank. Sheh ad Nooani20 16. MAKING SERVICES WORK FOR POOR PEOPLE oo often, services fail poor people-in Increasing poor clients' choice and * access, in quantity, in quality. But the fact participation in service delivery will help them * that there are strong examples where monitor and discipline providers. Raising poor services do work means governments and citizens' voice, through the ballot box and citizens can do better. How? By putting poor widely available information, can increase their people at the center of service provision: by influence with policymakers-and reduce the 7 enabling them to monitor and discipline service diversion of public services to the non-poor for providers, by amplifying their voice in political patronage. By rewarding the effective policymaking, and by strengthening the delivery of services and penalizing the incentives for providers to serve the poor. ineffective, policymakers can get providers to Freedom from illness and freedom from serve poor people better. illiteracy-two of the most important ways poor Innovating with service delivery people can escape poverty-remain elusive to arrangements will not be enough. Societies many. To accelerate progress in human should learn from their innovations by development, economic growth is, of course, systematically evaluating and disseminating necessary. But it is not enough. Scaling up will information about what works and what require both a substantial increase in external doesn't. Only then can the innovations be resources and more effective use of all scaled up to improve the lives of poor people resources, internal and external. As resources around the world. become more productive, the argument for The challenge is formidable, because making additional resources becomes more persuasive. services work for poor people involves changing And external resources can provide strong not only service delivery arrangements but also support for changes in practice and policy to public sector institutions. It also involves bring about more effective use. The two are changing the way much foreign aid is complementary-that is the essence of the transferred. As governments, citizens, and development partnership that was cemented in donors create incentives for these changes, they Monterrey in the spring of 2002. should be selective in the problems they choose Governments and citizens use a variety of to address. They should be realistic about methods of delivering services-central implementation difficulties. And they should be government provision, contracting out to the patient. private sector and nongovernmental organizations (NGO)s, decentralization to local THE PROBLEM governments, community participation, and direct transfers to households. There have been Poverty has many dimensions. In addition to spectacular successes and miserable failures. low income (living on less than $1 a day), Both point to the need to strengthen illiteracy, ill health, gender inequality, and accountability in three key relationships in the environmental degradation are all aspects of service delivery chain: between poor people being poor. This is reflected in the Millennium and providers, between poor people and Development Goals, the international policymakers, and between policymakers and community's unprecedented agreement on the providers. Foreign-aid donors should reinforce goals for reducing poverty. The the accountability in these relationships, not multidimensional nature of poverty is also undermine it. reflected in the World Bank's two-pronged [Excerpted, with changes, from World Development Report 2004: Making Services Work for Poor People (World Bank & Oxford University Press, 2003), pp. 1-18] Figure 16.1 Progress in human z development: off track strategy for development-investing in people People living on less than $1 a day and improving the investment climate. That five Percent of the eight goals and one of the two prongs 30 of the strategy for development concern health and education signals how central human 20LS \ development is to human welfare. , But progress in human development has 10 lagged behind that in reducing income poverty (figure 16.1). The world as a whole is on track 190 to achieve the first goal-reducing by half the 1990 1995 2000 2005 2010 201! proportion of people living on less than $1 a Primary school completion rate day-thanks mainly to rapid economic growth Percent in India and China, where many of the world's _ 100 poor live. But the world is off track in reaching the goals for primary education, gender 90 equality, and child mortality. To reach all of these goals, economic growth 80 / is essential. But it will not be enough. The projected growth in per capita GDP will by 70 itself enable five of the world's six developing 1990 1995 2000 2005 2010 201. regions to reach the goal for reducing income poverty (table 16.1). But that growth will secondary school enable only two of the regions to achieve the Girls as a percent of boys primary enrollment goal and none of them to Z 100 reach the child mortality goal. If the economic growth projected for Africa doubles, the region 95 will reach the income poverty goal-but still 90 fall short of the health and education goals. In Uganda, despite average annual per capita GDP 85 growth of 3.9 percent in the past decade, child 80 mortality is stagnating-and only partly due to 1990 1995 2000 200! the AIDS epidemic Because growth alone will not be enough to - Under-five mortality rate reach the goals, the international community r_ Deaths per 1,000 live births 100 has committed itself-in a series of recent meetings in Monterrey, Doha, and 80 Johannesburg-to greater resource transfers by 60 developed countries and better policies and 40 institutions in developing countries. The level of resource transfers is difficult to calculate _20 precisely. Some estimates are converging 0 around a figure of $40 billion to $60 billion a 1990 1995 2000 2005 2010 201. Note. Blue line isthe trend line to reach the year in additional foreign aid-so long as the Millenium Development Goal. The red line money is accompanied by policy and shows the actual progress to date Source:www.developmentgoals.org. institutional reforms to enhance the productivity of domestic and external resources. Ensuring basic health and education outcomes is the responsibility of the state (box 16.1). But many governments are falling short on their obligation, especially to poor people. In Armenia and Cambodia, child mortality rates for the poorest fifth of the population are two to three times those for the richest fifth. Only about 60 percent of the adolescents in the poorest fifth of the population in the Arab Republic of Egypt and Peru have completed primary school, while all those from the richest fifth have. Table 16.1 Economic growth alone is not enough to reach all the Millennium Development Goals People living on less than $1a day Primary school completion rate Under-five mortality Annual average Target 2015 growth Target 2015 growth Target 2015 growth , GDP per capita (percent) alone (percent) (percent) alone (percent) (per 1,000 alone (per growth births) 1,000 births) 2000 2015* z (percent per year) East Asia 5.4 14 4 100 100 19 26 x Europe and Central Asia 3.6 1 1 100 100 15 26 Latin American and the Caribbean 1.8 8 8 100 95 17 30 m Middle East and North Africa 1.4 1 1 100 96 25 41 South Asia 3.8 22 15 100 99 43 69 Africa 1.2 24 35 100 56 59 151 *GDPgrowth projections from World Bank (2003a). Note: Elasticity assumed between growth and poverty is-1.5; primary completion rate is0.62; under-five mortality is -0.48. Sources: World Bank (2003a), Devarajan (2002). To meet this responsibility, governments and people-that is, on the services poor people citizens need to make the services that need to improve their health and education. contribute to health and education-water, Public spending on health and education is sanitation, energy, transport, health, and typically enjoyed by the non-poor. In Nepal 46 _ education-work for poor people. Too often, percent of education spending accrues to the these services are failing. Sometimes, they are richest fifth, only 11 percent to the poorest. In failing everybody-except the rich, who can opt India the richest fifth receives three times the out of the public system. But at other times, curative health care subsidy of the poorest fifth. they are clearly failing poor people. Even though clean water is critical to health outcomes, in Morocco only 11 percent of the SERVICES ARE FAILING POOR PEOPLE IN poorest fifth of the population has access to safe FOURAYS water, while everybody in the richest fifth does. FOUR WAYS Second, even when public spending can be How do we know that these services are failing reallocated toward poor people-say, by poor people? First, while governments devote shifting to primary schools and clinics-the about a third of their budgets to health and money does not always reach the frontline education, they spend very little of it on poor service provider. In the early 1990s in Uganda the share of nonsalary spending on primary education that actually reached primary schools BOX 16.1 SERVICES-A PUBLIC was 13 percent. This was the average: poorer RESPONSIBILITY schools received well below the average. Third, even if this share is increased-as the By financing, providing, or regulating the services that Ugandans have done-teachers must be present contribute to health and education outcomes, and effective at their jobs, just as doctors and governments around the world demonstrate their responsibility for the health and education of their nurses must provide the care that patients people. Why? First, these services are replete with need. But they are often mired in a system market failures-with externalities, as when an infected where the incentives for effective service child spreads a disease to playmates or a farmer benefits from a neighbor's ability to read. So the private sector, delivery are weak, wages may not be paid, left to its devices, will not achieve the level of health corruption is rife, and political patronage is a and education that society desires. Second, basic health way of life. Highly trained doctors seldom wish and basic education are considered fundamental human rights. The Universal Declaration of Human Rights to serve in remote rural areas. Since those who asserts an individual's right to "a standard of living do serve there are rarely monitored, the adequate for the health and well-being of himself and penalties for not being at work are low. A of his family, including ... medical care ... [and a right to education that is] . . . free, at least in the elementary survey of primary health care facilities in and fundamental stages." No matter how daunting the Bangladesh found the absentee rate among problems of delivery may be, the public sector cannot doctors to be 74 percent. When present, some walk away from health and education. The challenge is to see how the government-in collaboration with the service providers treat poor people badly. "They private sector, communities, and outside partners-can treat us like animals," says a patient in West meet this fundamental responsibility Africa. z By no means do all frontline Figure 16.2 Eight sizes fit all? service providers behave this C way. Many, often the majority, yes tinancing with contracting are driven by an intrinsic Easy motivation to serve. Be it monitor? w through professional pride or a no P > genuine commitment to help yes poor people (or both), many Homogeneous ? teachers and health workers z deliver timely, efficient, and no services, often in yes Easy courteous yes ~~~~~~~to difficult circumstances- monitor? n S collapsing buildings, no Local government provision overflowing latrines-and with few resources-clinics without Pro-poor? drugs, classes without textbooks. The challenge is to yes contracts reinforce this experience-to Easy no ~~~~~~~~to replicate the professional o tnmonitor? 44 ethics, intrinsic motivation, and yes self-monitoring providers ;11 other incentives of these I providers in the rest of the Homogeneous ? service work force. Q4 The fourth way services fail Easy es community control, vouchers poor people is the lack of to demand. Poor people often monitor? n don't send their children to Client power-imitate market school or take them to a clinic. In Bolivia 60 percent of the children who died before age five had not Central government financing with contracting (1). seen a formal provider during the illness In a favorable political context, with agreement culminating in their death. Sometimes the reason on what government should do, an is the poor quality of the service-missing easy-to-monitor service such as immunization materials, absent workers, abusive treatment. At could be delivered by the public sector, or H other times it is because they are poor. Even financed by the public sector and contracted when the services are free, many poor rural out to the private or nonprofit sector, as with families cannot afford the time it takes to travel primary health centers in Cambodia. the nearly 8 kilometers to the nearest primary Infrastructure services could be managed by a school in Mali or the 23 kilometers to the nearest national utility or provided by the private sector medical facility in Chad. with regulatory oversight. Weak demand can also be due to cultural Note that the particular configuration in factors, notably gender. Some parents refuse to which this arrangement will work is special. In send their daughters to school. Husbands have the developed countries there is much been known to prevent their wives from going discussion of a set of reforms, started in New to clinics-even for deliveries. And the social Zealand, that involve greater use of explicit distance between poor people and service contracts-either from the government to the providers (70 percent of nurses and midwives in private sector, or from central ministries to the rural Niger had been raised in the city) is often ministries responsible for specific services. The a deterrent. New Zealand reforms are justified by a well-established public sector ethos, reasonable WHAT CAN BE DONE? management information systems, and supporting institutions, including legal systems, The experience with service delivery suggests a to allow contract enforcement. These features constellation of solutions, each matching increase the "monitorability" of certain services various characteristics of the service and the by reducing the gap between contracted and country or region. While no one size fits all, realized outcomes. perhaps eight sizes do. These preconditions do not exist in many developing countries, so the template of these reforms cannot be used mechanically. If there is no good legal system and the civil service is subject to bribes (a form of clientelist politics), private sector contracts might be a major source z of corruption. In these countries, government should perhaps be even more output-oriented-not as a means of tweaking a * "M well-functioning system but as a way of getting the system to provide much greater improvements in services and generating new information. Central government provision (2). 1 When the service is difficult to monitor-explicit , contracts are difficult to write or enforce-but the politics are pro-poor and clients .d homogeneous, the traditional, centralized public _ sector is the appropriate delivery system. The French education system, which administers a i uniform service centrally, is one of the best examples. But too many countries fall into the ; _ _ trap of thinking that just because the service is .. difficult to monitor, it must be delivered by the A_ government. When students are heterogeneous, e N when the politics of the country are not geared toward poor people, government control of the -V education system-with no participation by a- students, parents, or local communities-can E leave the poor worse off. i Local government financing with contracting (3). _ With heterogeneous preferences, local Ii governments should be involved in services. When local politics are pro-poor (but national best thing to do is to strengthen the client's politics aren't), local governments could be power as much as possible. But that can be more reliable financiers of services, and vice difficult. Even means-tested voucher schemes or versa. Easily monitored services such as water or subsidies could be diverted to the non-poor. electricity can be contracted out to public or Transparent, rule-based programs, such as private utilities, as in Johannesburg. Progresa in Mexico, are needed to make it difficult to hide middle-class capture. Local government (or deconcentrated central In services such as water and electricity, government) provision (4). governments intervene to regulate monopoly For difficult-to-monitor services, such as providers and protect the poor-and not education (for quality), management because there are significant externalities. So responsibility might be ceded to parent groups separating the policymaker from the provider, when the politics are conducive. Giving clients a and making the provider accountable to the choice through vouchers enables them to client through prices, can strengthen client express their heterogeneous preferences. And power and lead to better results. Poor people the competition created by clients having a can be protected from high prices if charges rise choice may improve service quality-as with with use (with an initial, free amount). water vouchers in Chile or sanitation vouchers Allowing small, independent water providers to in Bangladesh. compete with the local monopoly can also discipline provision and keep prices down. Client power (5, 6, 7, 8). But prices-without accompanying subsidies When publicly financed services are subject to or transfers to poor people-cannot be used to capture-the politics are not pro-poor-the strengthen client power in education because of the externalities in primary education. A History. market-based allocation would not be in The country's history can also have a bearing on society's interest. The same applies to health which service delivery arrangements are likely services with externalities, such as to succeed. Until the 19th century, the immunization. In curative health care, the education systems of Britain and France were asymmetry of information between client and private and the church was the dominant provider makes strengthening client power provider. The government had an incentive to problematic. Better information on preventive develop an oversight mechanism to ensure that care or on how to choose medical providers the schools taught more than just religion. That z (possibly disseminated by nonprofit proved valuable when education was c organizations) can ameliorate the problem. In nationalized in these countries: the systems extreme cases, it may be that only community continued to run with strong regulatory groups or altruistic nonprofits can effectively oversight. provide these services to poor people. Water providers in the Netherlands started These service delivery arrangements as private companies, making the concept of represent efforts to balance problems with the water as an economic good, and charging for it, long route of accountability (clientelist politics, acceptable. When the system was shifted to hard-to-monitor services) with the short route. municipal ownership, pricing remained. Even if The reason societies choose the long route is the Dutch never introduce private participation that there are market failures or concerns with in water, they have achieved the separation equity that make the traditional short route- between policymaker and provider. In sum, a consumers' power over providers-inadequate. country's history can generate the incentives for But the "government failures" associated with certain institutions to develop-and those the long route may be so severe that, in some institutions can make the difference in whether z cases, the market solution may actually leave a particular service arrangement succeeds or poor people better off. fails. EIGHT SIZES FIT ALL WITH ADJUSTABLE SECTORAL SERVICE REFORMS WAISTBANDS What do these conclusions tell us about the The foregoing simplified scheme captures only reform agenda in individual sectors? In part of the story. At least two features are left education there is a tradeoff between the need out. for greater central authority to capture societywide benefits, such as social cohesion, Failed states. and the need for greater local influence Countries where the state is failing (often because student learning is difficult to monitor countries in conflict) need service delivery at the central level. The tradeoff is sharper arrangements different from those where the when the concern is the quality of education state is fairly strong. Primary school completion rather than the quantity. In Indonesia rates in Senegal and the Democratic Republic of centralized public delivery of education has 0id s Congo are about 40 percent. In Senegal-a enrolled children in schools, but it has been less stable democracy-the reforms in education, successful in teaching them valuable skills. To including those that strengthen client-provider increase the quality of education, therefore, links, would go through the government (to reforms should concentrate on increasing the strengthen the policymaker-provider links as voice and participation of clients-but not well). In the Democratic Republic of Congo- neglect the importance of central government where conflict has significantly weakened the oversight. In practical terms, this would call for state-ways should be found to empower more community management of schools and communities to improve education services- demand-side subsidies to poor people, but with even if it means bypassing government continuing stress on nationally determined ministries in the short to medium term. Social curricula and certification. funds and community-driven development are Governments intervene in health to control examples. They can be effective in improving communicable diseases, protect poor people service outcomes, but concerns about their from impoverishing health expenditures, and sustainability and scalability-and whether they disseminate information about home-based crowd out the growth of local government health and nutrition practices. Each of these capacity-should not be overlooked. activities is different, yet they are often provided by the same arrangement, such as a use them to curry favor with their rich clients central government public health system. They rather than the poor. should be differentiated. Sanitation is different because individuals can offload their refuse onto their neighbors. * Information about hand washing, exclusive So subsidies to individual households will not z breastfeeding, and nutrition can be delivered solve the collective action problem. Instead, (and even financed) by NGOs and other using community-level subsidies, and giving groups, delivery that works best when communities the authority to allocate them, reinforced by the community. puts the locus of authority where the external * Outreach services, such as immunizations, effects of individual behavior can be contained. can be contracted out but should be publicly financed. ~~~~~~~~~~SCALING UP * Clinical care is the service the client is least able to monitor, but the case in which How can all these reforms be scaled up so that government failures might swamp market developing countries will have a chance of failures. Where the politics are extremely meeting the Millennium Development Goals? pro-rich, even public financing of these First, additional resources-external and services (with private provision) can be internal-will be needed to capitalize on these O counterproductive for poor people. The reforms. Second, these reforms must be non-poor can capture this financing, leaving embedded in a public sector responsible for - no curative services for the poor-and no ensuring poor people's access to basic services. room in the budget for public health This means that the sectoral reforms must be services. Strengthening client power, through linked to ongoing (or nascent) public sector either demand-side subsidies or reforms in such areas as budget management, co-payments, can improve matters for poor decentralization, and public administration people, even if there is asymmetric reform. It also means that a well-functioning information between client and provider. public sector is a crucial underpinning of service delivery reform. In the same vein, there should In the infrastructure sectors-such as water, be reform in donor practices-such as sanitation, transport, and energy-the harmonizing procedures and making more use rationale for government intervention is of budget support-to strengthen recipient different from that in education and health, countries' efforts to improve service outputs. and so should be the policy responses. The Third, what information can do-as a main reason for government involvement in stimulant for public action, as a catalyst for water and energy provision is that those change, and as an input for making other services are provided through networks, so reforms work. Even in the most resistant direct competition is not possible. societies, the creation and dissemination of Governments also intervene to ensure access information can be accelerated. Surveys of the by poor people to these services. So the role of quality of service delivery conducted by the government is to regulate and in some cases Public Affairs Centre in Bangalore, India, have subsidize production and distribution. There increased public demand for service reform. The are few advantages to the government's surveys have been replicated in 24 Indian states. providing the service itself, which explains why The public expenditure tracking survey in the past decade has seen many privatizations, Uganda is another example, as is the Probe concessions, and the like in water and energy. report on India's education system. Whether delivered by a private or public Beyond surveys, the widespread and company, the service needs to be regulated. systematic evaluation of service delivery can Who that regulator is will determine service have a profound effect on progress toward the outcomes. At the very least, when the company Millennium Development Goals. Evaluations is public, the regulator should be separate from based on random assignments, such as Mexico's the provider (when the policymaker and Progresa, or other rigorous evaluations give provider are indistinguishable, making this confidence to policymakers and the public that separation is all the more difficult). The what they are seeing is real. Governments are situation is worse when water or energy is constantly trying new approaches to service subsidized, because the sizable rents from this delivery. Some of them work. But unless there is subsidy-the benefits of below-market-rate some systematic evaluation of these programs, services-can be captured by politicians, who there is no certainty that they worked because z of the program or for other reasons. Based on to educate a child or stop an infant from dying. the systematic evaluations of Progresa, the But institutions are needed that will educate a government has scaled up the program to generation of children or reduce infant encompass 20 percent of the Mexican people. mortality by two-thirds. These do not crop up o The benefits of systematic program overnight. Nor will a single institutional evaluation go beyond the program and the arrangement generate the desired results. > country. These evaluations tell policymakers in Everything from publicly financed central other countries what works and what doesn't. government provision to user-financed They are global public goods-which might community provision can work (or fail to work) z explain why they are so scarce. If these in different circumstances. o evaluations are global public goods, the Despite the urgent needs of the world's poor tn international community should finance them. people, and the many ways services have failed One possibility would be to protect the 1.5 them, quick results will be hard to come by. percent of World Bank loans that is supposed to Many of the changes involve fundamental shifts - be used for evaluation (but rarely is), so that in power-something that cannot happen this sum-about $300 million a year-could be overnight. Making services work for poor used to administer rigorous evaluations of people requires patience. But that does not projects and disseminate the results worldwide. mean we should be complacent. Hubert In addition to creating and disseminating Lyautey, the French marshal, once asked his information, other reforms to improve service gardener how long a tree would take to reach delivery will require careful consideration of the maturity. When the gardener answered that it l particular setting. There is no silver bullet to would take 100 years, Marshal Lyautey replied, improve service delivery. It may be known how "In that case, plant it this afternoon." z 0 2-4 ------. . c -i 2--;i m 0-' v s--. .~~~~~~~~~~~~~~~~~~' [email protected]@@@@@ 0@*@ SOSSOSO---@---@---- . 17. REALIZING THE DEVELOPMENT PROMISE OF THE DOHA AGENDA H n the eve of the World Trade - @ Organization's (WTO) Fifth Ministerial Figure 17.1 The recovery is building ... Meeting in Canccen in September 2003, but slowly the world's trade ministers-and the GDP growth, percent per annum - governments they represent-face enormous Forecast Z challenges. The global trade talks are stalled in Developing _ several policy domains vital to developing economies 1- countries-agriculture, nonfarm trade, access to 4 patented drugs for countries without domestic drug industries, special and differential 3 treatment, and dispute settlement. Nor is there High-income much progress in other contentious areas, such economies as the "Singapore issues" of investment, 2 \ * competition, trade facilitation, and government procurement. 1 At the same time, the global recovery 0 continues to sputter. Although some signs of a * turnaround have been evident in the United 0 2 2000 2001 2002 2003 2004 2005> States, Europe seems to be losing momentum, : and Japan appears positioned for another Sourcc: WoXrld lBanik dita aind projections. disappointing year. The Chinese economy, r reinforced by a positive performance in East Asia in 2002, continues to bustle along, but performance in the Middle East and North concerns over Severe Acute Respiratory Africa; sluggish performance in Europe, Syndrome (SARS) and lost export momentum in especially Germany, has adversely affected many the face of the world slowdown haunted the countries in Central and Eastern Europe. Even regional outlook. South Asia continues to grow though progress on trade would undoubtedly more rapidly than the world average. Latin boost investor confidence, politicians coping America is showing signs of an upturn, driven in with slow growth and high unemployment at part by renewed confidence in Brazil, a home have been finding it more difficult to risk tentative rebound in Argentina, and an increase alienating influential constituencies by in Mexico's growth; however, the recession in accepting bold proposals in the world trade the Repceblica Bolivariana de Venezuela, when talks. coupled with political difficulties in the Andean The outlook for the remainder of this year countries, continues to weigh down regional and for 2004, though somewhat improved, is performance. Africa, suffering from low unlikely to produce growth strong enough to commodity prices, is growing slowly; although cut sharply into unemployment rates (figure faster than in the 1980s and 1990s, today's 17.1). Uncertainty in the global environment growth is far short of the pace necessary to remains unusually high. Structural problems make significant dents in the poverty persist-overcapacity in high-tech industries headcount or to achieve the Millennium globally, rising twin deficits in the U.S. fiscal and Development Goals in health and education. current accounts, and lingering bad loans in War has adversely affected regional Japanese and (to a lesser extent) European [Excerpted, with changes, from Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda (Washington, D.C.: World Bank, 2003), pp. 1-18] banks. Other problems may prove more * Because most poor people live in rural areas, transitory. The cessation of conflict in Iraq has trade barriers in agriculture are among the not yet produced complete calm, and the most important to poverty reduction. inability to reach consensus at the UN Security * Labor-intensive manufactures have been the Council has created a lingering distrust among most dynamic market segment for every multilateral partners that clouds the global major region, including Africa, yet many find that their exports - business environment. Nonetheless, policy developing countries responses are promising. Governments in the meet obstacles in foreign markets-high United States and Europe reacted to weak tariffs, quotas, specific duties, and economic conditions with fiscal and monetary "antidevelopment" tariff structures that o policy to stimulate their economies. And at the discourage adding value in poor countries. global political level, the June meeting of the * In services, the potential for G-8, together with several subsequent bilateral development-promoting reciprocal gains is - meetings, began to mend frayed multilateral especially high. Regulations in some relations. It remains to be seen whether this developing countries still protect some from * - new positive momentum will extend into inefficient state monopolies multilateral collaboration in trade. competition-a drag on growth. (To be sure, The precarious international environment is proper regulation in some sectors must only one reason why the global trade talks have precede liberalization to avoid potential progressed slowly. Deeper explanations can also disruptions in socially important markets, be found in the history of multilateral trade such as finance or basic services.) Also, access talks themselves. With the incorporation of ever for developing countries' services exports to more countries-mainly from the developing industrial countries has yet to be fully bound world-the sheer number of actors has in the General Agreement on Trade in z expanded, making coalitions more difficult to Services (GATS) (World Bank 2001). Finally, build and consensus more elusive. Moreover, national laws prevent greater labor mobility previous multilateral rounds produced that would otherwise contribute to higher agreements in areas of primary interest to the standards of living in both receiving and rich countries that dominated these discussions, sending countries. particularly in manufactured goods. It was only * Reducing the costs of trading by improving with the Uruguay Round, concluded in 1994, international transportation services, customs that tentative steps toward freeing up trade in and ports, and logistics management-trade products of particular interest to developing facilitation-requires substantial new countries-notably agriculture and textiles- investment, additional technical assistance, were included. Consequently, many of the and coordinated multilateral efforts. Trade hardest issues for rich countries have been left facilitation is fundamental to realizing the to this negotiation. expanded trade promise of Doha, but the WTO agenda constitutes a small part of the REALIZING THE DEVELOPMENT challenge. * Finally, the issue of special treatment for s3s PROMISEOF THE DOHA AGENDA developing countries cuts across all of these The challenge is daunting. But so is the reward policy domains and affects trade preferences to success. With room for additional fiscal and and exemptions from WTO regulations. The monetary stimulus rapidly vanishing, progress pursuit of trade preferences and exemptions on structural reforms such as trade is important. from multilateral rules have not always In addition to bolstering investor confidence in served developing countries particularly well, the short term, a Doha Round agreement that both because preferences have not proven slashed trade barriers, particularly in reliable and because selective coverage has agriculture, would stimulate trade and raise often left productivity detracting trade incomes around the world, leading to a barriers in place. The residual barriers sap substantial reduction in global poverty. growth in the protected economies and in The open question is whether a new developing-country trading partners that are multilateral agreement will live up to the denied access. Perhaps most important, the development promise of the Doha Agenda. majority of the world's poor do not live in Several issues under discussion are pivotal to the least developed countries (LDCs). Trade development outcomes: preferences targeted at these countries do not benefit the three-quarters of the world's poor that live on US$1 per day in other on services, the middle-income countries have countries. In implementing new WTO rules, ample scope for undertaking reductions in new accords will be most effective if they protection that will accelerate their growth and recognize differences among individual provide access and a growth impulse to countries' capacity to undertake new, neighboring countries. High protection in these resource-intensive rules. These differences countries taxes their growth and their poor in require a new approach to special and much the same way as protection in the North. differential treatment. Low-income countries have a special interest in greater market access, but they cannot These areas pose difficult political challenges succumb to the siren calls of preferential for all segments of the international market access nor opt out of reducing border community-rich countries, middle-income protections at home, which tax exports and cut developing countries, and low-income countries into productivity growth. Preferences for LDCs alike. Rich countries account for two-thirds of can help, but would be more effective if they world trade and comprise nearly three-quarters were made less restrictive and more reliable of world GDP, so their domestic policies-most than at present-and if benefiting countries z evident in agriculture-have the greatest effect take the necessary policy steps, including on the global marketplace. Despite the fact that reductions in border protection, to promote a agricultural protection, tariff peaks, and supply response. Moreover, because other 0 antidumping measures shield powerful lobbies, developing countries are unlikely to be granted rich-country leadership in reducing this new trade preferences, global reciprocal protection is a prerequisite for a pro-poor reduction in trade barriers holds the most development outcome. promise for the world's poor. Today's middle-income developing countries Market access is not the whole development H have increased their global market share in the story. Even if developing countries succeed in last two decades. Because they include many of obtaining access to new markets, they will have the most dynamic global economies, their to adopt complementary policies-removing c domestic policies no longer have only minor obstacles to private investment, improving consequences for trade. With protection rates public investment in infrastructure, and > in manufactures three times the level of those providing education-to ensure that domestic in rich countries and with ubiquitous restrictions firms respond to new opportunities associated ni.-'' " _ > AO' D I . _ nt,,a, 1 S s.:EW *)X4,, ,4~~~~~~~~~~~~~~~ with greater integration, and that the benefits the rate they did to other developing of integration are transmitted to the poor. Put countries. differently, trade policies must be embedded in Consider how agricultural protection plays a coherent national development strategy- through individual commodity markets. Sugar in they are not a substitute for it. For all of these the European Union (EU), Japan, and the United reasons, realizing the development promise of States is commonly protected through a the Doha Agenda requires the participation of combination of quotas, tariffs, and subsidies all groups of the international community. allowing domestic sugar producers in those countries to receive more than double the world Z A DOHA DEAL FOR DEVELOPMENT market price. OECD governments support sugar c producers at the rate of US$6.4 billion annually- Agriculture is at the heart of a development an amount nearly equal to all developing country round exports. Prices are so high that it has become Agriculture is central to the development economic to grow sugar beets in cold climates H promise of this trade round for two reasons: and to convert corn to high-fructose corn syrup. most of the world's poor work in agriculture Sugar imports in the OECD have shrunk to next and most of the world's protection is directed to nothing. U.S. subsidies to cotton growers at agriculture. Some 70 percent of the world's totaled US$3.7 billion last year, three times U.S. poor live in rural areas and earn their income foreign aid to Africa. These subsidies depress from agriculture. Largely exempt from pre- world cotton prices by an estimated 10-20 Uruguay Round trade agreements to reduce percent, reducing the income of thousands of protection, agriculture is among the most poor farmers in West Africa, Central and South distorted sectors in international trade. Even Asia, and poor countries around the world. In though levels of average tariff protection are West Africa alone, where cotton is a critical cash z comparable in rich and poor countries, the crop for many small-scale and near-subsistence extensive use of producer subsidies in the OECD farmers, annual income losses for cotton growers countries and the fact that the OECD are about US$250 million a year. Rice support in constitutes two-thirds of world agricultural Japan amounts to 700 percent of production at trade underscore the centrality of their policies world prices, stimulating inefficient domestic to development outcomes. Reducing protection production, reducing demand, and denying in agriculture alone would produce roughly export opportunities to India, Thailand, Vietnam, two-thirds of the gains from full global and other countries. liberalization of all merchandise trade. More than 70 percent of subsidies in rich A few facts are enough to establish the countries are directed to large (often corporate) context: protection facing developing country farmers. These farmers have incomes that are exporters in agriculture is four to seven times higher-often substantially so-than average higher than in manufactures in the North and incomes in Europe, Japan, and, to a lesser extent, two to three times higher in developing the United States. The net effect of subsidizing countries (IMF-World Bank 2002). Tariff peaks the relatively rich in wealthy countries at the are particularly high in rich countries against expense of adverse price penalties for the products from poor countries. Tariff escalation products of the relatively poor in developing that discourages development of further countries is to aggravate global income processing is more pronounced in agriculture in inequalities. Said differently, subsidies make the both rich and poor countries. Hefty specific relatively rich even richer and the poor even duties are particularly common in rich poorer. countries; they automatically increase Realizing the development potential of protection when commodity prices fall, Doha requires phased reductions of border throwing the burden of adjustment onto protection and subsidies. Of these, border global prices and poor countries. Subsidies in protection is the most important. These OECD countries amount to US$330 billion-of reductions ought to be done in a way that cuts which some US$250 billion goes directly to off antidevelopment tariff peaks, reduces tariff producers. The effect is to stimulate escalation, and phases out specific duties. A overproduction in high-cost rich countries and pro-poor reform also means reforming policies shut out potentially more competitive products that distort particular commodities of from poor countries. It is no wonder that importance to developing countries-sugar, agricultural exports from developing countries cotton, rice, wheat, and dairy products. to rich countries grew in the 1990s at just half Because global prices may rise in some commodities, the international community may Table 17.1 A pro-poor tariff reduction program want to design-and help finance-a program (percent) of adjustment in vulnerable countries that Rich Developing suffer deterioration in their terms of trade. Agriculture These effects are likely to be confined to a few Average 5 1A0 countries for several reasons: many food Maximum 10 15 importers also export other agricultural Manufacturing products that will experience positive Average 1 5 terms-of-trade changes from liberalization; Maximum 5 10 others now have tariffs on those same food _ imports, tariffs that can be reduced to offset any increase in global prices; some food with cuts to 15 and 10 percent in developing importers will gain access to new markets in countries (table 17.1). This program, combined nonagricultural products and be able to export; with reductions in prevailing tariff averages, a and, because prices will change relatively slowly, decoupling of agricultural subsidies, and an end some food importers will increase domestic to agricultural subsidies could realize nearly z production in response to higher prices and three-quarters of the gains that might be become self-sufficient or even net exporters. anticipated from full merchandise liberalization. Nonetheless, even though the changes are This illustrative pro-poor program, if c likely to be manageable at the global level, the implemented progressively over the five years issue requires study and in some countries may to 2010 and accompanied by a realistic require action. productivity response, would produce gains for c Because rich and poor countries alike will developing countries of nearly US$350 billion in benefit from liberalization, all must make the additional income by 2015. Rich countries policy changes necessary to realize its would benefit, too, with gains on the order of development promise. The rich countries, whose US$170 billion. All of this would mean that 8 policies arguably distort international trade the percent fewer people would be living in most, cannot escape leadership on agriculture. poverty in 201 5-140 million fewer people Moreover, leadership among donors to finance living below US$2 per day. If greater opening of > a program to cushion adjustment is essential; services, including Mode 4, were to occur, the their technical assistance to help implement benefits would be substantially greater. standards and facilitate trade is needed to help Delivering a Doha deal that spurs developing countries take advantage of new development will not be easy. Negotiators may > trade opportunities. Middle-income countries, well have to transcend the mercantilist whose own policy reforms would produce a mind-set that tends to dominate trade large share of the benefit to developing negotiations. All segments of the international countries from global liberalization in community must keep their focus on potential agriculture, have to move more assertively than gains, not only from "winning concessions" in the past. Their high tariffs have an adverse from foreign partners, but also on the gains impact on growing South-South trade, from domestic reforms that "pay for" foreign especially with neighboring countries. In a concessions. Rich-country negotiators will do pattern common to all regions, agricultural better, for themselves and for the developing exporters in East Asia, for example, paid world, if they keep in mind that their own one-third of all their tariff duties to other East countries can benefit by directing agricultural Asian governments (second only to tariffs paid subsidies away from production subsidies for to get into rich countries). Agricultural large farmers toward income subsidies to exporters in the Middle East paid 44 percent of relatively small family farms, delivered in a form their tariff duties to regional neighbors. that is decoupled from output. Middle-income country negotiators likewise have to keep in Delivering the Doha deal for development mind that their telecommunications and The potential for reciprocal reductions in trade financial services could be much more efficient protection holds the promise of better lives for and less expensive if more competitors were everyone. To illustrate, we consider the effects allowed to enter well-regulated markets. of a pro-poor agreement in which rich Low-income countries that have high countries cut tariff peaks to 10 percent in protection will find they benefit from domestic agriculture and to 5 percent in manufacturing, reforms that lower costs of imported inputs, and in which these reductions are reciprocated increase domestic competition that spurs - - -Z; . .,. -,,.. .~ o = eS '. ~~~ s _ s >~6 .p .' afe stud ha hw httae reom eeopnonre, too hav muc to ~~~~~~~~~~~~~~~l ~~~~~~~~~~~~~~~~~~~~F reonzis an fats to the j ganl Mideicm; :"e'ormer. conre-cniun a C . productivity growth, and expand exports. Study also a worthy prize. after study has shown that trade reforms Developing countries, too, have much to redound first and fastest to the reformer. gain. Middle-income countries-continuing a grNegotiations will determine the pace and process begun over the last two decades-may H details of a final package, but the broad do well to open selected services markets, often outlines of a potentially good deal for plagued by inefficiency that dampens development are already evident from this productivity of the whole economy, in exchange analysis. Realizing that agricultural reform in a for greater access in agriculture and _ time of rapidly rising budget deficits will labor-intensive goods. Because many countries contribute positively to their own economic have already lowered tariffs, the issue is now to growth, rich countries would benefit from bind those new lower levels. Finally, reforms in agriculture. Lopping off tariff peaks low-income countries would benefit if, in and phasing out the ATC at the end of 2004 will relinquishing demands for exemption from benefit developed-country poor who are forced disciplines on their own tariffs, they succeed in to pay more for food and clothing because of obtaining commitments to greater market external protection (Gresser 2002). Further access in products and services of importance to progress on the part of all countries in reducing them, a new commitment to consistency in the tariffs in manufactures would benefit administration of preferences, and developing countries and stimulate healthy development assistance to facilitate trade and South-South trade. For the rich countries, the implement new WTO rules in accord with prospect of greater access to markets in domestic capacities and development priorities. developing countries-home to 80 percent of Delivering this type of deal would go far the world's population with markets growing toward fulfilling the development promise of two to three times faster than their own-is the Doha Agenda. Your Partner to Achieve Excellence in the Automotive Industry _ ~~~~~~T~ -- ^ .~~~~~~~~~~5~ 7~~~~~~~-~T ', -~~~~~~~~~ot-. Quahy eliv ' 1 ' 1 y.31~~Thii de ad drv the autmoiv indsr.Tf AI, is-yorprnri | ~~~~~~~~~~~Cost,Qvallty, Dellveiy.. These demands dnive the automottve industry. Tha AIOC. is your paflner in iunproving global competitiveness throughout The supp;y cKiin itnd on the shop floor Our selv ces focus ori doiving down costs, imiop:vinq; vil.Vily ad t,'Isuring on-l.tte delivery Autorwotive Industry Development Centre Your paruter I n becomirg globslly conem.t we I_~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~_ji v 0 ... W ~~Does cumbersome business regulation government focuses on the definition and matter? Yes, and particularly for poor people. In protection of property rights. But where the Xmuch of Africa, Latin America, and the former government regulates every aspect of business aSoviet Union, excessive regulation stifles activity heavily, businesses operate in the ; ~~productive activity (figure 18.1). And government informal economy. Regulatory intervention is l does not focus on what it should-defining and particularly damaging in countries where its protecting property rights. These are the regions enforcement is subject to abuse and corruption Mwhere growth stagnates, few new jobs are (figure 18.2). z created, and poverty has risen. In Africa, poverty s ~~rates have increased in the last three decades, Poor Countries Regulate Business the Most with more than 40 percent of the population It takes 2 days to start a business in Australia, now living on less than one dollar a day. Two but 203 days in Haiti and 215 days in the decades of macroeconomic reform in Latin Democratic Republic of Congo. There are no o America have not slowed the rise in poverty. And monetary costs to start a new business in D ~~in most former Soviet countries, poverty Denmark, but it costs more than 5 times income increased in the decade prior to the fall of per capita in Cambodia and over 13 times in communism, and even faster thereafter. In 2003, Sierra Leone. Hong Kong (China), Singapore, the number of people earning less than a dollar Thailand, and more than three dozen other sH a day remains at 1.2 billion and the number economies require no minimum capital from earning less than two dollars a day at 2.8 billion, start-ups. In contrast, in Syria the capital "First, I would like to have work of any requirement is equivalent to 56 times income kind," says an 18-year-old Ecuadorian. The per capita, in Ethiopia and Yemen,17 times, in quotation is from Voices of the Poor, a World Mali, 6 times. _ Bank survey capturing the perspectives of poor Businesses in the Czech Republic and sE | ~people around the world. People know how to Denmark can hire workers on part-time or escape poverty. What they need is to find a fixed-term contracts for any job, without decent job. Studies using household survey data specifying maximum duration of the contract. confirm this-the vast majority of people who Part-time work, exempt from some regulations, escape from poverty do so by taking up new is less costly to terminate than full-time employment opportunities. employment. In contrast, employment laws in El Not any job will lead out of poverty. If it was Salvador allow fixed-term contracts only for simply a matter of creating jobs, having the specific jobs, and set their duration to be at state employ everyone would do the trick. This most one year. Part-time workers receive the has been tried in some parts of the world, benefits of full-time workers, and are subject to notably in communist regimes. What is needed the same regulation on procedures for is to create productive jobs and new businesses dismissal. that create wealth. For this, companies need to A simple commercial contract is enforced in adjust to new market conditions and seize 7 days in Tunisia and 39 days in the opportunities for growth. But all too frequently Netherlands, but takes almost 1,500 days in this flexibility is taken away by cumbersome Guatemala. The cost of enforcement is less than regulation. Productive businesses thrive where 1 percent of the disputed amount in Austria, Piure I". Poor COmntsue ftquhftate Bsines The M ! Cc-Uripr;v r. | I Enirye;:..&:ourr. I") 0 Co r.virI o.:. .f 6e lI 7 0 E .:V.T.-rjI,- . fl.nd. z 43 zZI Canada, and the United Kingdom, but more aggressively adopted best-practice regulation than 100 percent in Burkina Faso, the over the last two decades. Contract > Dominican Republic, Indonesia, the Kyrgyz enforcement, for example, has been improved - Republic, Madagascar, Malawi, and the in line with the latest reforms in the United Philippines. Kingdom, and bankruptcy law has been revised Credit bureaus contain credit histories on following the Australian reforms of 1992. almost every adult in New Zealand, Norway, Another important variable in explaining and the United States. But the credit registries different levels of regulatory intervention is in Cameroon, Ghana, Pakistan, Nigeria, and legal origin. Together, income and legal origin Serbia and Montenegro have credit histories for account for more than 60 percent of the less than 1 percent of adults. In the United variation in regulation. While country wealth Kingdom, laws on collateral and bankruptcy has long been recognized as a determinant of give creditors strong powers to recover their the quality of institutions (for example, in the money if a debtor defaults. In Colombia, the writings of Nobel laureate Douglass North), the Republic of Congo, Mexico, Oman, and Tunisia, importance of legal origin has only recently a creditor has no such rights. been investigated. The regulatory regimes of It takes less than six months to go through most developing countries are not indigenous- bankruptcy proceedings in Ireland and Japan, but they are shaped by their colonial heritage. more than 10 years in Brazil and India. It costs less When the English, French, Spaniards, Dutch, than 1 percent of the value of the estate to Germans, and Portuguese colonized much of resolve insolvency in Finland, the Netherlands, the world, they brought with them their laws Norway, and Singapore-and nearly half the and institutions. After independence, many estate value in Chad, Panama, Macedonia, countries revised legislation, but in only a few Venezuela, Serbia and Montenegro, and Sierra cases have they strayed far from the original. Leone. These channels of transplantation bring about Regulation in poor countries is more systematic variations in regulation that are not cumbersome in all aspects of business activity a consequence of either domestic political (figure 18.3). Across all five sets of indicators, choice or the pressures toward regulatory Bolivia, Burkina Faso, Chad, Costa Rica, efficiency. Common law countries regulate the Guatemala, Mali, Mozambique, Paraguay, the least. Countries in the French civil law tradition Philippines, and Venezuela regulate the most. the most. Australia, Canada, Denmark, Hong Kong However, heritage is not destiny. Tunisia, for (China), Jamaica, the Netherlands, New Zealand, example, is among the least regulated and most Singapore, Sweden, and the United Kingdom efficient countries in the area of contract regulate the least. There are exceptions. Among enforcement. Uruguay is among the least the least regulated economies, Jamaica has regulated economies in the hiring and firing of z workers. In contrast, Sierra Leone, a common law country, heavily regulates business entry. India, another common law country, has one of the more regulated labor markets and most inefficient insolvency systems. Heavier Regulation Brings Bad Outcomes Heavier regulation is generally associated with more inefficiency in public institutions- longer delays and higher cost (figure 18.4)-and more _) unemployed people, corruption, less 2. productivity and investment, but not with t5 better quality of private or public goods. The countries that regulate the most-poor countries-have the least enforcement capacity 5 H and the fewest checks and balances in government to ensure that regulatory N1, discretion is not used to abuse businesses and extract bribes. Excessive regulation has a perverse effect on the very people it is meant to protect. The rich X and connected may be able to avoid cumbersome rules, or even be protected by them. Others are the hardest hit. For example, delivery of basic infrastructure. There is no rigid employment laws are associated especially quality control for products. And entrepreneurs, strongly with fewer job opportunities for fearful of inspectors and the police, keep women (figure 18.5). And fewer regulatory operations below efficient production size. restrictions on sharing credit information Critics argue that in developing countries benefits small firms' access to finance the most. regulation is rarely enforced and plays no role Heavy regulation also encourages in the conduct of everyday business. Our entrepreneurs to operate in the informal analysis suggests otherwise. And if it is the case economy. In Bolivia, one of the most heavily that regulation is irrelevant in poor countries, regulated economies in the world, an estimated why not just remove it? A doctor can be hired 82 percent of business activity takes place in the in place of every government official regulating informal sector. There, workers enjoy no social business activity or compliance with benefits and cannot use pension plans and employment laws. A textbook can be printed in school funds for their children. Businesses do place of every batch of paperwork required for not pay taxes, reducing the resources for the this or that license for running a business. OCr - Cr reultin.Ialcontis,thovrnetsntedfspndn .s.cs r on m Good regulation does not rean zero groups in society. regulation. In all countries, the government is Instead of spending resources on more involved in various aspects of control of regulation, governments are better off defining business. The optimal level of regulation is not the property rights of their citizens and none, but may be less than what is currently protecting them against injury from other found in most countries, and especially poor citizens and from the state. Two examples of ones. For business entry, two procedures- such rights are creditor rights-the legal rights registering for statistical purposes, and for tax of lenders to recover their investment if the and social security-are necessary to fulfill the borrower defaults-and the efficiency of social functions of the process. Australia limits enforcing property rights through the courts. entry procedures to these two. Sweden has Countries that protect such rights-rich three, including registration with the labor countries like New Zealand and the United office. New Zealand, the least regulated Kingdom, and poor countries like Botswana, economy in the world, has 19 procedures to Thailand, and South Africa-achieve better enforce a contract. For employment regulation, economic and social outcomes. In credit Denmark regulates the work week to 37 hours, markets, assuring lenders of fair returns on the premium for overtime pay to 50 percent, investment increases the depth of credit the minimum annual paid leave to 27 days, and markets and the productivity of investment, the severance pay of a worker with 20 or more even after controlling for income, income years of experience to 10 months' wages. It also growth, inflation, and contract enforcement. regulates other aspects of hiring and firing, and Such assurance also increases access to these the conditions of employment. No one thinks markets, since lenders are willing to extend that Danish workers are discriminated against. credit beyond large and connected firms if they Yet Denmark is among the countries with the know that their rights to recover loans are most flexible employment regulation. The secure. Danish example is also an illustration of the difference between rigidity of regulation and One Size Can Fit All-in the Manner of Business social protection. Cumbersome regulation is Regulation often an inappropriate tool for protecting weak Many times what works in developed countries works well in developing countries, too, defying Enterprise Law in 1999 to enhance growth in the often-used saying, "one size doesn't fit all." private business activity. In entry regulations, reducing the number of Such partial reforms may lead to a virtuous procedures to only those truly necessary- cycle where the success of one reform statistical registration, and tax and social emboldens policymakers to pursue further security registration-and using the latest reforms. The Russian Federation simplified > technology to make the registration process business entry in the past year, reducing the electronic, have produced excellent results in number of procedures from 19 to 12, and the Canada and Singapore, Latvia and Mexico-but associated time from 51 days to 29 days. The also in Honduras, Vietnam, Moldova, and reforms led to the creation of a large number c Pakistan. Similarly, designing credit information of new private businesses, which in turn registries has democratized credit markets in became the constituency for improvements in Belgium and Taiwan (China), but also in other regulatory practices. Employment law has flexibility - Mozambique, Namibia, Nepal, Nicaragua, and since been revised, resulting in more - Poland. in hiring and firing workers. Countries like Australia, Denmark, the But reform options are not always the same Netherlands, and Sweden present best practices across rich and poor countries. There are cases in business regulation, meaning regulation that where good practices in developed countries fulfills the task of essential controls of business are difficult to transplant to poor countries. without imposing an unnecessary burden. In Bankruptcy is one example where the these countries, high levels of human capital in establishment of a sophisticated bankruptcy the public administration, and the use of regime in a developing country generally results modern technology, minimize the regulatory in inefficiency and even corruption. Both burden on businesses. And where private lenders and businesses suffer. In such instances, z markets are functioning, competition is a developing countries could simplify the models substitute for regulation. By combining simple used in rich countries to make them workable regulation with good definition and protection with less capacity and fewer resources. In the of property rights, they achieve what many poorest countries, it is better not to develop a others strive to do: having government sophisticated bankruptcy system and to rely c regulators serve as public servants, not public instead on existing contract-enforcement masters. mechanisms or negotiations between private Aside from how much and what they parties. Similarly, specialized commercial courts regulate, good practice countries share common work best in countries with more resources and elements in how they regulate. For example, administrative capacity. Poor countries can countries with the least time to register a implement reforms with the same principle- business, such as Canada, have single specialization-but with specialized judges or registration forms accessible over the Internet. specialized sections within general jurisdiction Countries that take the least time to enforce a courts. collateral agreement, Germany, Thailand, and the United States, for example, allow REFORM PRACTICE out-of-court enforcement. The design of regulation determines the efficiency of Regulatory reform has been continuous in most economic and social outcomes. developed countries, improving the Good practice is not limited to rich countries environment for doing business. or countries where comprehensive regulatory reform has taken place. In many instances, * Australia has built in regulatory reform by reform in some areas of business regulation has including "sunset" provisions in new been successful. Tunisia has one of the best regulations, with the regulation contract enforcement systems in the world. automatically expiring after a certain period Latvia is among the most efficient countries in unless renewed by Parliament. Also, the entry regulation. In 2002, Pakistan Office of Regulation Review vets each electronically connected all tax offices in the proposed regulation using a "minimum country, and streamlined business registration. necessary regulation" principle. In 1996, the As a result, the time to start a business was office was charged with cutting the reduced from 53 to 22 days. The Slovak regulatory burden on small businesses in Republic recently implemented best-practice half, with annual reviews of progress laws on collateral. Vietnam revised its achieved. Table 18.1 x Examples of Good Reform Practices 0 Principles of Regulation Some Examples Starting a Business * Registration is an administrative, not judicial, process * China, United States * Use of single business identification number * Denmark, Turkey * Electronic application made possible * Latvia, Sweden, Singapore z * Statistical and tax registration sufficient to start operations * Australia, Canada, New Zealand * No minimum capital requirement * Chile, Ireland, Jamaica Hliring and Firing Workers * Contracts "at will" between employers and employees * Denmark, Ireland, Singapore * No limits on fixed-term contracts * Australia, Denmark, Israel * Apprentice wages for young workers * Chile, Colombia, Poland * Shift work between slow and peak periods * Hungary, Poland Enforcing a Contract * Judiciary has a system for tracking cases * Slovak Republic, Singapore * Summary procedure in the general court * Botswana, New Zealand, Netherlands _ z * Simplified procedure in commercial courts * Australia, Ireland, Papua New Guinea * Attorney representation not mandatory * Lebanon, Tunisia Getting Credit * Strong creditor protection in collateral and bankruptcy laws * New Zealand, United Kingdom * No restrictions on assets that may be used as collateral * Slovak Republic, Hong Kong (China) * Out of court or summary judgments for enforcing collateral * Germany, Malaysia, Moldova * Regulations provide incentives for sharing and proper use of credit information * Belgium, Singapore, United States Closing a Business * Limited court powers * Australia, Finland, United Kingdom * Bankruptcy administrator files report with creditors * Botswana, Germany, Hungary * Continued education for bankruptcy administrators * Argentina, France, Netherlands * Denmark revised its business entry regulation But there has been much less reform in in 1996 by removing several procedures, developing countries, with the result that making the process electronic, and businesses are sometimes burdened by eliminating all fees. Since then, a outdated regulation. For example, the company cost-benefit analysis of proposed new law regulating business entry dates back to regulation is conducted, resulting in two of 1884 in the Dominican Republic, to 1901 in every five proposed regulations being Angola, and to 1916 in Burkina Faso. But OECD shelved. countries have all revised their laws in the last * In the Netherlands, much of the work on two decades. Similarly, employment regulation reducing administrative costs is done by an in Africa often dates to colonial times or was independent agency, ACTAL (Advisory revised just after independence. On average, it Committee on the Testing of Administrative is over three decades old. This is evidence Burdens). Established in 2000, ACTAL has against the "reform fatigue" in developing only nine staff members and is empowered countries, often attributed to the work of to advise on all proposed laws and international aid agencies. regulations. To date, simplification of With laws to meet the needs of business administrative procedures has been achieved developed decades or even a century earlier, it in the areas of corporate taxation, social is hardly surprising that those laws often security, environmental regulation, and impose unnecessary burdens on business today. statistical requirements. The estimated But this is also grounds for optimism: outdated savings are US$600 million from streamlining regulation is often the result of inertia or a lack the tax requirements alone, of capacity to reform, not of entrenched * Sweden has a "guillotine" approach for business or government interests. regulatory reform, in which hundreds of There are many reforms where the obsolete regulations are cancelled after the regulatory burden on business can be reduced, government periodically requires regulatory while the government can redirect agencies to register all essential much-needed resources toward the tasks that regulations. really count-such as providing basic social H z .g"AS I C ouft and Ntotmrs Are Botteeedc to Business Start-Up .uD f,trh >~~~~~~~~~~~.:i W,l ry(ir ;~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~532 O Ime dms4 Co s ofdinmme p capt Thne. days Cost Y of . me percapa v: Note: BIY sn In these figues rqresent mecian vahes for countules with and vwthout notaq involvenit in buness se trglaonDknremes m merlne am staistically significant at the i perent level for the tOnmemeasures bu skldanitft oly at the 13 pment k fra the cost measwe. H . Sourm. Doing Business atabase services. Indeed, some countries have recently communications technology-to inform modernized many aspects of their business prospective entrepreneurs and to serve as a regulation, including Jamaica, the Republic of virtual one-stop shop for business registration. Korea, and Thailand. There is no reason why The introduction of a single registration form others should not follow. The benefits can be and silent consent in approving registration enormous. So are the costs of not reforming. have had enormous success. Reducing the Of course, reforms are not always easy. There number of procedures to statistical and tax ¢ are also instances where powerful lobbies registration and abolishing the minimum capital prevent or reverse regulatory reform. In 1996, requirement lighten the burden on the Peruvian government tried to reduce entrepreneurs and have been associated with mandatory severance payments by 50 percent. the creation of larger numbers of new A The uproar with unions made the government businesses. Other reforms that require withdraw the proposal quickly. Instead, legislative change include introducing a severance payments were increased. The general-objects clause in the articles of German government, in May 2003, proposed incorporation and removing notarial S4 far-reaching reforms aimed at making labor authorizations and court use from the markets more flexible. Such proposals have registration process (figure 18.6). Such reforms EH previously been withdrawn after threats of may be difficult to implement, as political will worker strikes. Another ill-fated reform comes in government and the private sector may from Croatia, where the private notaries' waver, but they have beneficial effects beyond profession has for years undermined the business entry. government's efforts to simplify business entry In employment regulation, five types of procedures and collateral enforcement. reform ease the burden on businesses and Simplification would mean more competition provide better job opportunities for the poor. and a loss of profits for the private notaries. Although Doing Business does not address * First, in most developing countries a general political economy of reform, the report gives reform toward reduction of the scope of other examples of reforms gone awry due to employment regulation has yielded positive opposing interests. results. The deregulation experience in Latin The analysis presented in this report suggests America (Chile, Colombia, Guyana, and specific policy reforms (table 18.1) that illustrate Uruguay) as well as in transition economies two main themes: first, that poor countries (Estonia) provides many lessons. have the furthest to go, and second, that when * Second, many OECD countries have focused it comes to the manner of regulation, one size on introducing flexible part-time and often fits all (in many cases there really is one fixed-term contracts. These contracts bring best practice). The list of reform examples is still groups that are less likely to find jobs incomplete. Future reports aim to enlarge it. (women and youths) into the labor market. In business entry, reforms that are easy to Germany has raised the duration of implement include the adoption of better fixed-term contracts to eight years, while information and intragovernment Poland does not mandate any duration limit. * Third, several countries have either reduced Fgred B Credit Bureaus Are Associated with More Credit the minimum wage (Colombia) or lowered Privatecedit %GDP the minimum wage limit for new entrants More C (Chile). * Fourth, some countries (Hungary) have made it possible for employers to shift work time between periods of slow demand and peak periods, without the need for overtime payment. * Fifth, other countries have focused on easing regulation on firing. The most far-reaching reform was recently implemented in Serbia and Montenegro, where the severance Less 1 2 3 4 5 More payment for a worker with 20 years' tenure Countries ranced bycredit information sharing, quintiles was reduced from 36 months to 4 months. H Note: The correlation between private credit to GDP and private credit bureaus shown inthis figure controls for national income, income growth, inflation, rule-of- Z In contract enforcement, establishing law index, creditor-rights index, the presence of a public registry, and legal origin. information systems on caseload and judicial The relationship isstatistically significant at the 5percent level. statistics has had a large payoff. Judiciaries that Source: Doing Business database. have established such systems, as in the Slovak Republic, can identify their primary users and that have small claims courts (Japan, New the biggest bottlenecks. Simplifying procedures Zealand, the United Kingdom) have recently is also often warranted. For example, summary increased the maximum claim eligible for debt collection proceedings of the type recently hearing at the court. However, the manner ofh established in Mexico alleviate court congestion regulation of the judicial process in developing by reducing procedural complexity. When countries may need to be different. Where the default judgments-automatic judgments if the judiciary is still in its early stages of defendant does not appear in court-are development, as in Angola, Mozambique, or introduced as well, delays are cut significantly. Nepal, specialized courts may be premature. The structure of the judiciary can also be There, reformers can establish a specialized modified to allow for small claims and section dealing with commercial cases within specialized commercial courts. Several countries the general court or train specialized judges. I -- *_ _ E *, _ ., I,1 m 1, Simplification of judicial procedures is a disputed claim to collateral. Stronger powers associated with less time and cost. For example, for creditors to recover their claims in in some countries, such as Argentina, Bolivia, insolvency are associated with more access to Morocco, and Spain, businesses are obliged to credit. hire lawyers when resolving commercial Three areas of bankruptcy reform give the disputes. This increases the cost of enforcing most promise. The first is choosing the contracts, sometimes unnecessarily. In many appropriate insolvency law given a country's instances, the manager may simply present to income and institutional capacity. the judge proof of delivery of goods and Ill-functioning judiciaries are better off without z require payment. pouring resources into sophisticated bankruptcy o Establishing appropriate regulation and systems. There is a general misperception that incentives to facilitate private credit bureaus is bankruptcy laws are needed to enforce creditor >4 an essential start to encouraging access to rights. In practice, they often add to legal - credit (figure 18.7). In some cases-especially in uncertainty and delays in developing countries. poor countries where commercial incentives for Private negotiations of debt restructuring under private bureaus are low-setting up public contract and secured transactions law and the credit registries has helped remedy the lack of introduction of summary judgments, like those private information sharing, albeit second best for simple contract enforcement, will do. The to an effective private bureau. The design of second is increasing the involvement of credit information regulations influences the stakeholders in the insolvency process rather impact of bureaus: broader coverage of than relying on the court for making business borrowers and good regulations on collection, decisions. The third is training judges and distribution, and quality of information bankruptcy administrators in insolvency law and (including privacy and data protection) are practice associated with better functioning credit Of course, for governments to undertake z markets. reform there needs to be a strong constituency Legal creditor protections can be improved interested in change, so that inertia and the by reforming collateral law: introducing out of lobbying of entrenched political or business court or summary enforcement proceedings, groups can be overcome. By bringing evidence eliminating restrictions on which assets may be to the debate, Doing Business motivates the used as security for loans, and improving the need for change and informs the design of new clarity of creditors' liens through collateral regulations and institutions. registries and clear laws on who has priority in H ~~~~~~~~~,X, -- H~~~~~~~~~~~~~~~ _____--C I _ r ,______ROMANIA Your immediate investment priority xzO.\N' BANCA COMERCIALAw.b ,r ROMANA Your partner with solid local expertise BLICziWNlSt * Londtonl * Pitiris * Franiklurt * ( hisIMIa * Nec\- Yorli * klosco-,N < k\ N C.z k,1, 14 )X1-wwr7 s;* T 1esw* S -j- I , , -UL t-XLt~~~~~~C X f --- w A *:L' s A V~~~~~~.t w s | - 11 £ir ©DWorld Bank. Miso Lisanin, 2001 19. STRIVING FOR STABILITY IN DEVELOPMENT FINANCE STRIVING FOR STABILITY IN DEVELOPMENT FINANCE Ithough 2002 was a year of hesitant A global recovery, financial conditions | _ facing many developing countries were once again challenging, especially for those r countries (mainly middle-income countries) dependent on international financial markets. 0 Conditions improved a little in the early months of 2003, although the uncertainties surrounding Iraq cast a shadow over both the global economy and financial markets. - Concern over the recent pattern of financial "\ - flows for global development that has prevailed z in recent years is widespread-and understandably so. Since 1998, developing countries have repaid \ external debt to private creditors in developed \ countries. In some cases these net repayments of debt have been required by timorous capital \ markets grown wary of overexposure to A 3 developing-country debt. In others they reflect reduced demand for debt by countries that local-currency bond markets in several have either found alternative forms of external emerging economies and the development of finance or have reduced their overall demand several promising innovations to manage credit for external investment funds. Combined with risk. developing countries' steady accumulation of financial assets in high-income economies, The developing world is learning to live with however, these debt repayments mean that the less external debt 159 developing world has become a net capital The supply of debt capital to the developing exporter to the developed world. world, which swelled in the early 1990s, was On a net basis, therefore, capital is no longer first reduced by the shock of the East Asian flowing from high-income countries to crisis of 1997-98, then by the turmoil in global economies that need it to sustain their progress fixed-income markets in the summer of 1998, toward the Millennium Development Goals. The and most recently by the problems in global shortage is compounded in the poorest high-yield markets in the aftermath of the 2001 countries by a significant drop in official slowdown. However, this broad-based decline development assistance from bilateral donors. in debt flows, first evident in East Asia and the On the bright side, the steady drop in Russian Federation, is now focused on Latin external debt financing has been cushioned by America. resilience in foreign direct investment (FDI). A Some early signs of improvement in the further positive sign is the growth of external-debt market cropped up as 2002 came [Excerpted, with changes, from Global Development Finance 2003: Striving for Stability in Development Finance, Volume 1: Analysis and Statistical Appendix (Washington, D.C.: World Bank, 2003), pp. 1-4]. z to a close. Forecasts pointed to a further, A solid flow of FDI to developing countries gradual rise in debt flows in 2003 and 2004. It is should not be taken for granted, however. 2 unlikely, however, that private debt flows to Indeed, net FDI to developing countries has developing countries will return to the levels of already fallen from its peak of $179 billion in the 1990s. Nor would such a rebound 1999 to $143 billion in 2002. With the bulk of necessarily be desirable. net cross-border capital flows now coming in > While external bond and bank financing this form, it becomes increasingly important for W should continue to play an important role in policymakers and market participants to focus the financing strategies of governments and on sustaining FDI-and that depends critically z private-sector borrowers in developing on improvements in the investment climate. A o countries, the fixed commitments of debt healthy operating environment for the service are not well suited to the swings in corporate sector-including a sound domestic = nominal income experienced by many institutional framework-is a necessary developing countries, especially those condition for profitable investment and the dependent on primary commodities. Market mitigation of risk, and therefore for the - reactions to debt-servicing strains add a whole attraction of FDI. It is also required to promote new layer of volatility that can be severely productivity, entrepreneurship, and investment damaging to growth and poverty reduction. for domestic firms and farms, the sources of 90 The movement from debt to equity has been percent of developing-country investment and underway in private financial markets since the main drivers of growth. Finally, it is the key ;- 1998. Policymakers should recognize the determinant of whether domestic capital stays consequences of this important shift-and at home or flees abroad. l respond to the opportunities and policy challenges it poses. Growth and poverty reduction depend on a prudent management of sovereign financial z Measures to promote the inflow of foreign risks c equity capital are critical Financial markets react swiftly to adverse news, FDI is less volatile than external debt. Its focus making it all the more important to plan : on long-term returns makes it clearly more carefully to mitigate risk. Fortunately, bond appropriate for developing countries. And it markets in developing countries have moved in can bring advantages both in technology and in recent years toward issues denominated in local c operational and financial management. In this currency, although such issues tend to have context, the resilience of FDI in the face of the shorter maturities, at least in the early years of W sustained weakness in debt flows is a hopeful market development. During such a transition, sign. it is all too easy for a sovereign borrower to In contrast to debt investors, companies have shift, rather than mitigate, its risk, with been willing to raise their exposures in the currency risks giving way to the rollover risks developing world, in part because their that occur when domestic debt is linked to a holdings in developing countries are a relatively foreign currency. The fact that the epicenter of small part of their overall capital stock, and in most middle-income debt problems in recent * part because many mature companies now years has been the local short-term money and expect a large portion of their revenue growth bond markets serves as a graphic reminder of and cost reduction (and thus their profit the case for prudent debt management. growth) to come from operations in developing countries, whether they are producing for Workers' remittances are an increasingly export or for local sale. important source of external financing FDI usually brings with it important benefits An under-recognized trend in the external such as access to markets and transfers of finances of developing countries-especially technology and skills. In a world of volatile some of the smallest and poorest-is the private capital flows, however, it is the financial steadily growing importance of workers' aspects of FDI that are particularly desirable. remittances. Such flows now rank second in Companies tend to invest in developing importance only to FDI in the overall external countries for the long haul. They see their financing of developing countries. At $80 returns rise and fall with the overall billion in 2002, remittances were about double performance of the host economy and the level of official aid-related inflows and generally keep a significant share of earnings in showed a remarkably steady growth through the country. the 1990s. The strong U.S. labor market was J~~~~~~~~~~~~~~~~~~~~~~~ -- :-. - -i -- A !- -- 16 ~~-; -, - H *1~~~~~~~~~~~~~~~~~~~~~~~~~~7 > ~~~~~~~~~~~~~~~~~' S' _, especially important in fueling the growth of several countries will require additionalm remittances, and the United States is now by far resources before their debt can be considered the largest source of remittance flows. sustainable. Demographic trends suggest that remittance For highly indebted middle-income flows from high-income countries will grow countries, the International Monetary Fund over the medium term, with the demographic (IMF) has proposed the creation of a sovereign dependency ratio falling in poor countries and debt restructuring mechanism that would rising in rich ones. However, heightened provide an orderly framework for restructuring security concerns and a softening labor market external sovereign bond debt. in the high-income economies will probably The proposed framework is intended to be check these flows over the next year or two. useful not only after a sovereign default, but This prospect highlights the importance of the also ahead of such an event, as its existence issues of trade in services and migration. would make both debtors and creditors act in a i ~~~~~~~~~~~~~~moremeasured fashion, avoiding some of the 161 The international community must help extreme actions that have complicated recent borrowers manage pressures to reduce defaults on sovereign debt. debt The discussion of this proposal reminds us Intense pressures to pay down external debt that the current set-up has not worked well have placed many countries under severe stress and that the debt difficulties of middle-income in recent years, usually with particularly adverse countries are likely to persist in a world of low consequences for poor people. There is now a nominal income growth. growing consensus that the mechanisms available to cushion these debt pressures are in POLICYMAKERS IN THE INDUSTRIAL need of reform. CUTISCNHL TBLZ progress has been made in providing debt relief DEVELOPMENT FINANCING- under the Heavily Indebted Poor Countries by improving aid and trade policies- Initiative. However, continued weakness in Although much of the policy and many of the commodity prices, and thus in the export institutional reforms needed to stabilize earnings of many poor countries, means that development financing must come from governments in developing countries, the conditions favorable for the growth of global authorities in the developed world can play an liquidity. With nominal interest rates within the important role. The major economies can Organisation for Economic Co-operation and support development most directly through Development (OECD) at their lowest levels in 50 coherent aid and trade policies that promote years and real short-term interest rates development. The commitments made in generally close to zero, the core condition for advance of the United Nations Conference on reversing the flow of capital from developing to Financing for Development in Monterrey in developed countries is in place. Through the March 2002 promised a modest increase in aid 1990s, the countries of the OECD made flows. These point to a welcome reversal of the important gains in reducing budget deficits, but o downward trend through most of the 1990s, much of this progress has been reversed in the but their scale is incommensurate with the past two years. The expectation of large, commitment to reach the Millennium continuing budget deficits may further reduce Development Goals by 2015. developing countries' access to funds, while The effectiveness of aid can be improved by fiscal stimulus packages, which provided an reallocating funds to poorer countries that have important near-term boost to growth, have the policies, institutions, and governance that now generally reached their limits of can be expected to reduce poverty. In those effectiveness. same countries, aid is also likely to be more The widespread debt difficulties of the productive if channeled through government corporate sector in the United States and institutions, with the close involvement of civil Europe were an important feature of the global society, rather than through project-oriented downturn in 2001, contributing not only to a institutions with intrusive management by pronounced, sustained downturn in capital donors. spending, but also to a rise in spreads in Most important of all, industrial countries high-yield debt markets. Given the large z can spur development by reducing agricultural number of investors who are active in both subsidies and trade barriers that discriminate industrial and emerging markets, the rise in against developing countries' exports. Industrial spreads on high-yield debt helped lift countries spend more than $300 billion each interest-rate spreads in markets for the external year in agricultural subsidies, about six times debt of developing countries. In Japan, the amount they spend on foreign aid. Unless corporate-debt woes and their effects on the progress is made on agricultural protection and banking system held back growth throughout subsidies, negotiations within the World Trade the 1990s and added to deflationary pressures Organization (WTO) are likely to be stalled, to throughout the economy. the detriment of growth and development. Japan serves as a graphic example of the costs of delaying necessary corporate and by ensuring broader macroeconomic adjustments. By contrast, the high-profile stability corporate bankruptcies in other mature The major economies also play an important economies-especially the United States-in role through their macroeconomic policies and 2002 can be seen as a mixed blessing. On the performances, which shape the global one hand, they underlined the severity of the opportunities open to developing countries. downturn and the magnitudes of the necessary Developing countries benefit most when the adjustments in corporate spending. On the major economies achieve steady, sustainable other, they served to highlight that corporate growth, avoiding booms and busts. Central restructuring is proceeding. banks in the major economies have established I~~~~~~~~~~~~~~~~~~ o3 0 +'8q1-~~~~~~~~~~~ S © World Bank. Masaru Gota, 2002 -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-7 YOUR QtOLDEN LINK TO RUSSiA'S BUSINESS One of Russia's highest rated private banks. Ranking amid the 20 Largest Eastern European banks. Stands among the top operators on the domestic market of precious metals, one of the biggest lenders to the gold- mining sector, and one of the Leading exporters of gotd bullion. Expert in syndicated financing of export oriented industries. The first Russian bank to receive a multimi[Lion-dottar loan from a syndicate of 11foreign banks for the purpose of financing the gold mining sector. Providing expert solutions in internationaL trade filnance. Accepted by major Export Credit Agencies. Providing guarantees for Russian companies to leading foreign banks in Europe, Asia and the United States. Structuring commodity finance operations. Helping to find good business partners in Russia. Professional staff, experienced management, fast decision- making. ill1N~OM OS *BA MI. 3Verkhniaya Radishevskaya str., Moscow, Russia, 109240 Tel.: 7-095-737-3272; Fax: 7-095-797-3250 E-mail: [email protected], www.nomos.ru CBR CeneraL License .2209 I' S< ~~~~- -r 1x~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-X-77w-7e JW AC7 y-4 I L J .~~~~~~~~~~~~ S. © World Bank. Bill Lyons, 2002 A GUIDE TO THE WORLD BANK - An accessible introduction to the World Bank, this book provides an overview of the Bank's history, organization, mission, and purpose. An introduction to the wealth of - 1 ~* information resources produced by the Bank, the Guide will help readers unders- *U tand and navigate the types of documents, statistics, and reports that are available D * a wdou tu (on the World Bank website and in print publications) and how best to find the infor- The World 1:^;1: mation they are looking for. ^isma -: September 2003. 264 pages. Stock no. Al 5344 (ISBN 0-8213-5344-6). Price _ 1^ US$15.. .j X siNOWALSOAVAILABLE IN HARD COVER < W April 2004. 264 pages. Stock no. A 15830 (ISBN 0-8213-5830-8). Price US$30. 0 .j MINIATLAS OF GLOBAL DEVELOPMENT The miniAtlas of Global Development is an at-a-glance guide to the most pressing development issues facing the world. Based on the World Bank's authoritative com- * pilation of development data -- the World Development Indicators -- as well as the -s it diliAI World Bank Atlas and the Little Data Book, the miniAtlas provides colorful and easy- ,EVELIPIENT to-read world maps, tables, and graphs that highlight key social, economic, and environmental data for 208 countries and territories. Specially designed to show detailed information on a small scale, the miniAtlas is a useful introduction and quick reference to today's most urgent development challenges. December 2003. 64 pages. Stock no. Al 5596. (ISBN 0-8213-5596-1). Price US$7. 0 s 1|1 31 ALSO AVAILABLE IN FRENCH AND SPANISH MINIATLAS DU DEVELOPPEMENT GLOBAL A copublicaton with Editions ESKA. Please order through Editions ESKA at www.eska.fr January 2004. 64 pages. ISBN 274720610-6. US$7. MiNiATLAS DE DESAROLLO GLOBAL LU A copublications with Grupo Editorial Norma. Please order through Grupo Editorial %^ Norma at www.norma.com LU January 2044. 64 pages. ISBN 958-04-7642-X US$7 THESE TITLES PROVIDE RELIABLE , DOING BUSINESS IN 2005: OBSTACLES TO GROWTH Z IN-DEPTH DATA AND Doing Business in 2005 is the second ina series of annual reports investigating the oANALYSIS. Z EDUCATION AND HIV/AIDS _ I The central message of this book is that the education of children and youth deser- Lu .'- ves the highest priority in a world afflicted by the HIV/AIDS epidemic. Education has r proven to be one of the most effective means of HIV prevention. This book finds that countries need to immediately strengthen their education systems in order to 0 p - offer hope for escaping from the grip of HIV/AIDS. April 2002. 103 pages. Stock no. A 15117 (ISBN 0-8213-5117-6). Price US$15. LAND POLICIES FOR GROWTH & POVERTY REDUCTION _ Land is a key component of the wealth of any nation. Well-defined, secure, and transferable rights to land are crucial to development efforts. This book considers the historical, conceptual, and legal contexts of property rights to land and land tran- sactions and explores the scope and role of governments and land policy formation. Bank Policy _-- l l ii53l A Copublication of the World Bank and Oxford University Press. World _) . ,L XWORLD BANK Research Report. June 2003. 290 pages. Stock no. A 15071 (ISBN 0-8213-5071-4). >_ |L !&3 | Publications I tmNt"i I[, Price US$30. ai 1lWTo order: www.worldbank.org/publications WORLD BANK PUBLICATIONS P.O. Box 960, Herndon, VA 20172-0960, USA 1_^;?. ,,, , Tel: 703-661-1580 or 800-645-7247, Fax: 703-661-1501 0 Geographic discounts apply. > Please visit http://publications.worldbank.org/discounts to see if you qualify for a discount. AVAILABLE AT BETTER BOOKSTORES Source code: APDAM4 A POPULATED WORLD Pop Total population 2001 mhe world's population increased from 2.5 billion people in 0 over I billion 10 - 49 million | 1 T*I1950 to 6.1 billion in 2001. Although the rate of growth is 13t 100-300nmillion under 10 million slowing down, between 2001 and 2025 1.6 billion people will 50 - 99 million no data ,|.. .1' - be added to the world, 96% of them in low- and middle-income economies. 0 ''1' ,.. rr.. ~ .- -a Wa - -/ahThPOaACe7f.'N../e.fKoa3oie..~f~ a ~~~~~~~~~~~Averageannual Ch-V .,l-~~•" ~ ae~ae. population growth rate ,U:eat . *.,. ...., ' r..:' . . ib990-20011.4% - . ,- ~~~~~~~~Frarice 2001ra20'ir1i0* .. . ~~~~~~~~Portugal? A,.1eSeeaoL> -lSps res. s sp , ;ee C . 1,fJueb;<;w l24 -.' ' GibNl~~~~~~~~~~~~~~,testetJPesleniso },,,, rsmtl ; taMaeS ; Isaams r@rp r slands AlgeriaMeco ,h L+bAa| | , Barbuda*.-a,d(a .oroccoXat itel ! jq_ ToRelou{NKb #~~~~~~~~~~~~~~~~~~~~~~ 1 - | . Spnhrori*X{GrtS/ Egua,,rmo _t -,, . Barhero' SpreesFstrret mal, olEB- P.r IS T... -,.I| C Verseape_ M I , , _ i | i Ib~~~~~~~~~~~~are. . , . Thetfacdaurl anga to M li w~~~~~~~~~~~~~_I . tnre _ Myna Van-tVa,.o9".It- _Fc.-iottee fT-hg aIr s h~W Tssoa~~~~~~~~~~~~~S,_~k Th,~~~~~G-b,,Ga ' Ll. <7£eT5r ;I st 11! Dem R~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Et'Of C-og o ,, +189 e d b n s e I N- o .~~~~~~~ . +134 , b~ , R- (, --'~~~~~~M. Soefens -Oaiou . ,, -~a, r Mo eter e Feeaodegascaree+302 - irgi' tS +220 eA Pr cc Mozembque Se uyceSes +156 A ues t r a I i a ti5 ef Ceng -s tfo +68075 T,ret-s.eAfrNa .oid loa - . +2 +59 : . _ i,lt) LJjl million ;-Ne I FUR E POPULATIONS t 78 9r F~9571 1 823, . 476, 519 '300< 1,37a& 673 ".I 'i MIIl liitxsJ-1--.5,i .::_. __ .. Hig-h-income East Asia & Europe & Latin America Middle East & South Sub-Saharan 6 . economiesd Pacific Central Asia & Caribbean North Africa Asia Africa 9 SX o 1 V J I a NDN I I N AIVd ' A a U I ' ASS 0 F T HE W OR 1 D B A N K - P E R S P EC T I V E S O N D E V E L O P M E N T LIVING WITH HIV/AIDS T. of infected adults I dgCS015 I9rejanai OoF oI ,' 8 {~ lobally, 42 million people are now living with HIV/AIDS. -20 andlndover - 4.9In S 2002, 5 million were newly infected with HIV and 3.1 million - 20% and over () s/o 4.91,, N-ay were killed by AIDS. The epidemic is developing rapidly in new |I:t I 0.0% - 1 9.9%/ under 0.5%/0 United Sweden PEn-nia areas, and is growing fastest in parts of the Europe and Central 5.(%- 9.9% no data Kingdom Dat-.,- Asia region. UNAIDS warns that 11 million more people will I -niand lnnsuwn Seth - . PolandBel, a acquire HIV in Asia by 2007 unless effective action is taken. .1 ~~~~~~~~~~~BlgjiaesSernmany,tw Ccon; IUKI 0ieonr top _ t R u ss i a n Federation East 4o/d and Pacitki France 7.2 million people are -c Andorna- sac Lt~~~~~~ Ka-khonani M-g¾, Iising%i]Ih HIV' r~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. 0000 ' 4-o ~ ~ ~~kra,nj ,-d. 4 o Vat, Kteongc JSahekatan KanynRep new People, ~~~~~~~~~~~~~~~~~~~~~~~PorW.tuga RIepoIf Kona T. .1,i..i . . .' Spain Italy _.40 '.a-Sert aijpn., I R ep-o f Jap a n .p ain SnGree e :-' Tu nke I" Tun- nk o ni tan -3T -Tajiki tana Onnmdo t OoitoGltirfUKI Tunisia Cypru, A - R tl t sn h n a Koreaa , ~~~~~~~~~~~~~~~~~Bdema (UK) Malla, q Islam- RIp. ., C hfhmttn a K.- ~oflanq 's . - .. ,,S Ethiopia Sii Lanoa nnailand BCaoooifF Vtp T 'B,rb.dGuyanaS erra Lnone and P n pe yOo4-.. ~~~~~~~~~~~~~~ Snyonnllno i-nv in~~~~~~~~~~mfdein " e - '' ProF* chGionc(Fr) r . Macdeo aK Pecerarno Staten SaoTome- SaSa - Sechae-s Cambodita Singapore Ppu Bera zil is^shrnAr Deong among.e.. a&orLeri IEnd onesi Suina !e h FZ -~~~~~~~~~~~~~24million dealh. fecCcng 0000mro fell Irom 4!'*in 1998 44 Timon-lirite Solorno _-a i, XiDS Ma . a. - Ia 29 . inMyarom 2002 Iaond ,~~Guy- S -a~ uL....oaao i,i Paietguay South Africa n'uonPFi 'd-aNgS 15%.doipregnanl V a 1 tonitni I traIiaA ,.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~GbnCmoi igp au ,-,;nr1 a. u gayn in 2 0 0 1 c itm p . red ai h - i ,,-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'''1:, _Argentina 2 . in199Tr : I I ne Newh YOUNG PEOPLE AND HIX U8_i 0.! iZaln Ill t- 046% %055 0.26% 0.1 4% ;.1 -.I - I -Is 0.1 9% 0.1 6% 10Ij 'k~i _ I East Asia Europe & Latin America & South Asia Sub-Saharan High-income & Pacific Central Asia Caribbean Africa economies 25 LIVING IN POVERTY 04,of people living on less than $2 a dav Poverty PPP$ 1997 or ladtest avai/ab/e c/itaLa Fcctc.S f ifferent economies define poverty differently. The 80°/o and over 200/c - 39% Iceland FoDh/ob/ , international measure of extreme poverty - as consumption Sig 60%/o- 794o under 20% ' and of less than $1 a day - corresponds to the poverty lines of the 40%, - 59%° no data United S,eden Ecteta- poorest economies. In wealthier Kingdom economies, poverty lines may Lavika ' be set at $2 a day or higher. However it is defined, .- D,,-kr Ltlh.ania \ eliminating aa n ad Neth Pa la,. poverty requires action at the local, national, and international C anadad Fua levels. RsinFdrto Chonnell, UK) 'R¢c l u s s ia n F e d c r a t i 0 nPoetinras Chennet te (505 - Baa - -- -~~~~~~~~~~~~~Poverty increases France- -. Europe and Central Asia -'|- -R'0C I2|.P SLN ' '1990:31 rranceat' - - million United States SpAindorraaMonac ! .1, Rr; - - 1999: P.rtugal I. + 97 million SpainJnitetateS; V a Italy dS Tun-,k,y+ -_ " living.-Sr inFe.,* poverty Srcen;Trey - i.,. R ..ert F ...ln~ Ge,b,lWUK) Tunisa ,C t nn-t, ,MIUKI n' ., . C Japan Ma-hal M.-c at sndsK, b- Mecico (US)Bmvng,na C,ba (US UJ a L hMa ubannen dep(0 (Sht- -Ann qua and B,rbuda by 0 (,P-~Rul) Na TeAetaa(NZ) D-mtnlnan , -; rSamo a .. .a at ,, 'En 'anuat - Tonga G - jjS nGe nada- arbad., Chad Sudan ;0 -T,rndad andTebago i - -t-hc (Sn) CccpneSea t n J ,o( F5 Panam- -. c '''' ' nan. S enaLeonera m Sn Lanka , Br-en,j *-|:-.r, *nchG--ons (fr} EquatorMaa tone| |... t; 0. d .,-, Fedw- vF Statee LSn a ea Poverty decreases S,.Gad - SneeV East Asia and the Pacific NP,pa Sr;uaongo enn - 1990:1,114 n do n B r million | e s toa Stnea a z D-m R,, 1. ef conq 1999: 897 million TtoLne Sco-en living in poverty , _'4¢, car ~~~~~~~~~~~~~~~Ma-rtU People worldwide Cetil Au s t r I living on a i a less than $1 a day . Scans -Leenee I 1990: 30% SoeglaY Afhtca 1999: 23% Anqentna ,11% 11% j- EXTREMEPOVERTY Zeatlnd 1. 1% 5%2 45% %of people living on less than $1 a-day. in low- and middle-income economies 199() 1999 1990 1999 199(1 1999 1990 1999 1990 1999 1990 1999 1990 an/ 1999 East Asia & Europe & Latin America Middle East & South Asia Sub-Saharan 26 Pacific Central Asia &Caribbean North Africa Africa 27 n~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ sd 0 1 V I (Ia N I I N El lIV d O 'I 3 A 'A (I al E. 1 D - -1 A s 0 6, IET H E W O R 1 D B A N K - P ES RPV S P E C T E S O N D E V E L O P M E N T . . PASSENGER CARS Tra Number per 1,000 people 1 2000 or latest available 2000 or latest available ,) / A ost economies are increasingly dependent on motor vehicles 500 and over 10-99 t 'a, (S', I ior Iransporling freighl and passengers. The demand for 300 - 499 U under 10 '' more roads and an increase in Iraffic brings with it problems of 100+ -2;!99 no data lUrn>a-c ''.. , j t urban congestion, air pollution, and a higher risk of accidents. Kinr-;. . ,, 1 rerard~~~~~~~ ~ ~ ~~~~P.a5sianiLna, Fedea lai,o High-income Ch 11 i erman /- Mr- economies ( ,-'s 5 - ..a '|ore than 1 motor vehicle , .s-j,_ -_ 1. e,,I Ii for every 2 people -- An'. .ro , 'I '(e -, | 1lr 1.3S~~~~~~~~~~~~~~.f I i I ~Poiga setugal5PrpSpair.At ;f,< na r r j !fe-i _"'4 1,-1Japan UK) Marshalr Mars San.ds _ -Mewo " 0nis ) Moro.U _ N MaUorS)s) TkIa (NZ) n Ant aadBarbuda FoamaiNa N' T- c>L .tt #1- ' ,_. s ._n,pr mshS5rso gadi - ¶u / om US ) Tuaau Ar-er,cro *rn dadand Tobago TheGamb o aS ' F T V Itt N "" ` -,a- -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.b6 - ~ ~~ . SierraMeone Suinca= *r Lanka Thd R 'ldm(rJ ;0 ,* ,r* lanaI palYrde*Can B'a 's' Congor 1 * ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~n15r Pr hraITom ,- aJi,rnd Seycheer i 7- < ' 4 &iddle-income economies De-sRe ,psmar-s o ( ~~~~~~~~~~~~~~~~~~~~~.t M j .-- MUdtu r~~~~~~~~~~~~~~~~a rnnrli Ar_ vAAa9 a Cn onga ReuniSn(Frdrrnbiqfi A S T r ul a New MOTOR VEHICLES 65 . erari(r 586 ii. Low-income economies Middle-income economies High-income economies 37 GIVING AND RECEIVING International Value of aid per capita Aid US5$2001 AidUreceived:SAid$donated:2ead id is one way for rich economies to transfer resources to Aod received: Aid donated:$0end or Af developing economies. But aid to the poorest economies 1 over $50 * over $100 N- tinr;firj rt fell from $58 billion in 1990 to $52 billion in 2001, resulting in a $11 -$50 $51 - $1()00r1 per capita decrease from $13 to $11. Additional aid - together $1-$10) $50 and under , {r na%ith good policies - could help lift millions of people out of $1 har $1, $5 and underpoverty. Ru s s Ia n F e d e r a t i o n C a rf a d a Ch-11, (UK i Portugal T'' t - r . , , , _ DmP'ople's U n i t ed S t a t e s Sp Oerrr.odu00 Ortrolrar (UK r . Muiru citrus SyneKilm _ _ C h i n a Korea ' .(UK)Be-muda ~ | | Tt | , - ,, Afnaeaa e M-lWa Me'.o TheBahamas Proerr-R-an ' ' t. fl N 9 iri n(t Cuba I Antg a Rarbad a Former- Ag a b ra!&. . Na-Nur C ni(aj- RepcartidTobo S * n st vr-tdO n.r u,a an -- Gorta nina- 1,a-,. ' d'~~~~'~~~~T.1a.,'. u. £ut. _ 'r ippier Cu(cd (Fr) Banamrda,,' a ea | M'| -an T Colon,$F.z,'I *. sr,. NPur ivrs_21 Me aM alIaate y s a FeaerarMd-uM IS.'terya 5ingai Mor 3 Aer, 1 I , - - fle2 N o I n oo e s i a * P::ua a HmdF Net officialdevelopment T-o-sterie MAg.ng aS assistance or aid received in 2001 Iands .n6;t' ur.9.o0 Pakistan $1.9 billion £; _ India- , ,$1.7 billion _1 7e!'- ' deunSoR-FU Indonesia $1.5 billion China $1.5 billion A u st r a I i a Soursth othL.. Vietnam $1.4 billion Uruguy Africa Argentrna New AID DEPENDENCI 4.6% 1.0% 1.0% Z0and Aid received as °/, of GNI 0.7% 0.5%0 in low- and middle-income economies 0.3% 2001 Sub-Saharan Europe & South Middle 46 East East Asia Latin America Africa Central Asia Asia & North Africa &Pacific &Caribbean 47 S N IOIV3IQN1I I N3INKdO13A'I 30( UAE I313 'AS 0 M-P~~~~~~~~~~~~~~~~~~~~~~~~- Bid Boland 1I Gas Treating Plant The Bid Boland 11 gas refinery will produce 2000 MMCFD of sweet gas 3.83 million tons of gas condensates (C2+) for Petrochemical plants and also propane,butane and natural gasoline for export with the estImated annual income more than 500 million US$. Plant feed gas is composed of 1700 MMCFD of sour gas and 300 MMCFD of sweet gas. Products are made up of 47 MMCFD of sweet gas,ethane,1048,C3,C4,1052,naturaI gasoline 0.83 all in million tons per annum. The project will be implemented EPC through international tender. Basic design of the project has been finished and the documents for EPC tender will be prepared by the end of year 2003. N . I . G .C Tel.:(+9821)8844008 Fax:(+9821)8824750 www.nigc.ir E-maiI:behdadfar@nigc.:;J I b II z0,~~~~~~~~~~~~04 00 o / A ' .. g 1/ ' '' ~ ~~~L!,. The IGAT-IV is a 56" pipeline and is designed to transmit 110 MMCMD of tI~I natural gas with a total length of - Jf 846t kilometers. gi ' - ,; ;-The operating pressure will be 1305 . - ; belo required . >% .The design activities of NS+ ^_-^^^- phase 1 >with ; ;'*- the ,length ¢ of 396 kilometers has been initiated in 2000 gi and all the documents has been prepared in 2001. Construction of the pipeline is already underway and the design of phase 2 with the length of 450 kilometers has been finished in year2002. The substitution of 40 BCM of gas in the country's future energy basket will decrease consumption of oil products and will substantially - v f - impact the economy and the I>/>_;¢ ~ environment. .I i i I I - : 0: ct S .- | >- c80 8~~~~~~~~~~~~~~~ - ~oo (a World Bank. Vuri Kozyrev, 2002 I Starting-a-Business Indicators-measure the procedures, time, cost, and minimum capital requirements to register a business formally Cost Min. capital O Number of Time Cost (% of income (% of income Country procedures (days) (US$) per capita) per capita) Albania 11 47 897 65.0 51.7 Algeria 18 29 548 31.9 73.0 Angola 14 146 5531 838.0 174.0 Argentina 15 68 324 8.0 0.0 z Armenia 10 25 68 8.7 11.0 Australia 2 2 402 2.0 0.0 Austria 9 29 1534 6.6 140.8 Azerbaijan 14 106 119 16.8 0.0 > Bangladesh 7 30 272 75.5 0.0 H Belarus 19 118 369 27.1 110.7 Belgium 7 56 2633 11.3 75.1 Benin 9 63 719 189.2 377.6 Bolivia 18 67 1499 166.6 0.0 Bosnia and Herzegovina 12 59 657 51.8 379.1 Botswana 10 97 1076 36.1 0.0 91.0 Brazil 15 152 331 11.6 0.0 Bulgaria 10 30 148 8.3 134.4 Burkina Faso 15 136 716 325.2 652.2 Burundi .. .. W4 Cambodia 11 94 1551 553.8 1825.8 Z Cameroon 12 37 1068 190.7 243.6 < Canada 2 3 127 0.6 0.0 Central African Republic .. .. Chad 19 73 870 395.3 652.2 Chile 10 28 493 11.6 0.0 China 12 46 135 14.3 3855.9 Colombia 19 60 498 27.2 0.0 Congo, Dem. Rep. of 13 215 785 871.9 320.7 Congo, Rep. of 8 67 1897 271.0 205.0 Costa Rica 11 80 879 21.4 0.0 C6te d'lvoire 10 77 873 143.1 235.2 H Croatia 13 50 843 18.2 50.7 Czech Republic 10 88 648 11.7 110.0 Denmark 4 4 0 0.0 52.3 Dominican Republic 12 78 1115 48.1 23.2 Ecuador 14 90 914 63.0 27.6 Egypt,Arab Rep. of 13 43 900 61.2 788.6 El Salvador 12 115 2690 129.3 549.5 Ethiopia 8 44 422 421.6 1756.1 Finland 4 33 739 3.1 32.0 France 10 53 663 3.0 32.1 Georgia 9 30 171 26.3 140.1 Germany 9 45 1341 5.9 103.8 Ghana 10 84 302 111.7 1.2 Greece 16 45 8115 69.6 145.3 Note: means no data available, Cost Min. capital _ Number of Time Cost (% of income (% of income Country procedures (days) (USS) per capita) per capita) 0 Guatemala 13 39 1167 66.7 36.5 _ Guinea 13 71 941 229.9 396.6 Haiti 12 203 875 198.9 209.8 Honduras 14 80 670 72.8 165.4 Hong Kong, China 5 11 581 2.3 0.0 Hungary 5 65 3396 64.3 220.32 India 10 88 239 49.8 430.4 Indonesia 11 168 103 14.5 302.5 Iran, Islamic Rep. of 9 48 113 6.6 7.4 Ireland 3 12 2473 10.4 0.0 Israel 5 34 784 4.7 0.0 Italy 9 23 4565 24.1 49.66 Jamaica 7 31 458 16.2 0.0 Japan 11 31 3518 10.5 71.3 Jordan 14 98 876 49.8 2404.2 0 Kazakhstan 10 25 153 10.1 35.2 ;t Kenya 11 61 194 54.0 0.0 Korea, Rep. of 12 33 1776 17.9 402.5 Kuwait 13 34 329 1.8 910.6 Kyrgyz Republic 9 26 39 13.4 74.8 Lao PDR 9 198 60 19.5 150.7 Latvia 7 11 513 14.7 93.0 Lebanon 6 46 5185 129.9 83.1 Lesotho 9 92 317 67.4 20.2 Lithuania 9 26 231 6.3 74.4 Macedonia, FYR 13 48 223 13.1 138.4 Madagascar 15 67 151 62.8 30.5 Malawi 11 45 201 125.4 0.0 Malaysia 8 31 961 27.1 0.0 Mali 13 61 557 232.2 597.8 Mauritania 11 73 452 110.2 896.7 Mexico 7 51 1110 18.8 87.6 Moldova 11 42 121 26.2 86.3 Mongolia 8 31 53 12.0 2046.9 Morocco 11 36 227 19.1 762.5 Mozambique 15 153 209 99.6 30.2 Namibia 10 85 332 18.7 0.0 Nepal 8 25 439 191.0 0.0 Netherlands 7 11 3276 13.7 70.7 New Zealand 3 3 28 0.2 0.0 Nicaragua 12 71 1335 337.8 0.0 Niger 11 27 759 446.6 844.0 Nigeria 10 44 268 92.3 28.6 Norway 4 24 1460 3.9 33.1 Oman 9 34 385 5.3 720.9 Pakistan 10 22 192 46.8 0.0 Panama 7 19 1057 26.3 0.0 Papua New Guinea 7 69 140 26.4 0.0 Note: ..means no data available. Cost Min. capital Number of Time Cost (% of income (% of income Country procedures (days) (US$) per capita) per capita) Paraguay 18 73 1883 160.9 0.0 Peru 9 100 510 24.9 0.0 Philippines 11 59 249 24.4 9.5 Poland 12 31 925 20.3 21.4 Portugal 11 95 1360 12.5 43.4 Puerto Rico 6 6 300 2.8 0.0 Romania 6 27 217 11.7 3.3 Russian Federation 12 29 200 9.3 29.8 Rwanda 9 43 534 232.3 457.3 SaudiArabia 14 95 10814 130.5 1610.5 Senegal 9 58 581 123.6 296.1 - Serbia and Montenegro 10 44 186 13.3 5.5 Sierra Leone 9 26 1817 1297.6 0.0 Singapore 7 8 249 1.2 0.0 Slovak Republic 10 98 401 10.2 111.8 Slovenia 10 61 1518 15.5 89.1 C4 South Africa 9 38 227 8.7 0.0 4; Spain 11 115 2366 16.4 19.6 Sri Lanka 8 58 154 18.3 0.0 Sweden 3 16 190 0.8 41.4 Switzerland 6 20 3228 8.5 33.8 Syrian Arab Republic 10 42 189 16.7 5627.2 Taiwan, China 8 48 807 6.1 217.4 z Tanzania 13 35 557 199.0 0.0 Thailand 9 42 144 7.3 0.0 Togo 14 63 760 281.4 531.4 Tunisia 10 46 327 16.4 351.7 Turkey 13 38 927 37.1 13.2 Uganda 17 36 338 135.1 0.0 O Ukraine 14 40 210 27.3 450.8 United Arab Emirates 10 29 4944 24.5 404.0 United Kingdom 6 18 264 1.0 0.0 United States 5 4 210 0.6 0.0 Uruguay 10 27 2043 46.7 699.0 H Uzbekistan 9 33 72 16.0 64.3 Venezuela, RB 14 119 788 19.3 0.0 Vietnam 11 63 129 29.9 0.0 Yemen, Rep. of 13 96 1294 264.1 1716.9 Zambia 6 40 80 24.1 137.8 Zimbabwe 10 122 1322 285.3 0.0 Note: ..means no data available. Hiring-and-Firing Indicators-measure the degree of rigidity in employment laws Flexibility-of- Conditions-of- Flexibility-of- Employment- Country hiring index employment index firing index laws index 0 Albania 33 76 15 41 Z Algeria 58 60 19 46 Angola 71 89 74 78 Argentina 71 81 46 66 Armenia 51 84 37 57 Australia 33 61 13 36 Z Austria 33 41 14 30 Azerbaijan 71 90 27 63 Bangladesh 33 85 32 50 Belarus 71 89 71 77 Belgium 33 90 22 48 Benin 48 86 20 52 Bolivia 58 95 45 66 Bosnia and Herzegovina 53 63 31 49 0 Botswana 33 55 17 35 Brazil 78 89 68 78 Bulgaria 43 90 26 53 Burkina Faso 53 79 27 53 Burundi 58 76 51 62 Cambodia 33 81 49 54 Cameroon 48 43 39 44 Canada 33 52 16 34 Central African Republic 53 84 50 62 Chad 78 93 27 66 Chile 56 65 29 50 China 17 67 57 47 Colombia 33 85 60) 59 Congo, Dem. Rep. of 73 63 43 60 Congo, Rep. of 53 78 49 60 Costa Rica 58 83 46 63 C6te d'Ivoire 53 61 45 53 Croatia 76 89 31 65 Czech Republic 17 63 27 36 Denmark 33 25 17 25 Dominican Republic 33 79 35 49 Ecuador 37 63 65 55 Egypt, Arab Rep. of 33 83 61 59 El Salvador 81 75 52 69 Ethiopia 58 67 29 51 179 Finland 71 43 52 55 France 63 61 26 50 Georgia 51 66 49 55 Germany 63 46 45 51 Ghana 33 56 17 35 Greece 78 81 43 67 Guatemala 58 85 51 65 Guinea 78 44 57 60 Flexibility-of- Conditions-of- Flexibility-of- Employment- Country hiring index employment index firing index laws index Haiti 58 85 35 60 Honduras 33 87 47 56 Hong Kong, China 58 22 1 27 Hungary 46 92 23 54 India 33 75 45 51 Indonesia 76 53 43 57 Iran, Islamic Rep. of 33 77 47 52 z Ireland 48 68 30 49 Israel 33 64 16 38 Italy 76 62 40 59 Jamaica 33 52 18 34 Japan 39 64 9 37 60 - Jordan 33 82 64 H Kazakhstan 33 89 42 55 Kenya 33 53 16 34 Korea, Rep. of 33 88 32 51 Kuwait 33 40 50 41 Kyrgyz Republic 71 90 33 64 Lao PDR 33 87 44 54 v1~ Latvia 58 87 42 62 Lebanon 53 50 35 46 E Lesotho 58 51 25 45 Lithuania 71 90 31 64 X4 Macedonia, FYR 65 53 32 50 Z Madagascar 48 86 49 61 Malawi 33 68 54 52 Malaysia 33 26 15 25 Mali 53 86 23 54 Mauritania 62 47 66 59 Mexico 81 81 70 77 O Moldova 71 75 54 67 Mongolia 33 90 25 50 Morocco 56 63 33 51 Mozambique 73 85 64 74 Namibia 17 57 54 43 F- Nepal 33 54 47 45 Netherlands 51 79 33 54 New Zealand 33 43 20 32 Nicaragua 33 90 58 61 Niger 53 89 34 59 Nigeria 17 76 36 43 Norway 58 39 25 41 Oman 58 78 25 54 Pakistan 65 75 33 58 Panama 81 87 68 79 Papua New Guinea 17 57 4 26 Paraguay 58 90 71 73 Peru 71 81 69 73 Philippines 58 73 50 60 Flexibility-of- Conditions-of- Flexibility-of- Employment- - Country hiring index employment index firing index laws index Poland 33 92 39 55 O Portugal 76 88 73 79 - Puerto Rico 33 67 24 41 C Romania 48 85 29 54 Russian Federation 33 77 71 61 Rwanda 53 94 32 60 Saudi Arabia 33 58 16 36 Senegal 48 83 30 54 Serbia and Montenegro 51 88 29 56 Sierra Leone 56 84 62 67 Singapore 33 26 1 20 Slovak Republic 34 89 60 61 Slovenia 53 84 41 59 South Africa 42 36 30 36 . Spain 76 88 45 70 H Sri Lanka 33 52 40 42 0 Sweden 56 39 31 42 Switzerland 33 53 23 36 Syrian Arab Republic 33 79 22 45 Taiwan, China 81 59 32 57 Tanzania 57 77 49 61 Thailand 78 73 30 61 Togo 53 80 36 57 Tunisia 73 53 44 57 Turkey 58 91 17 55 Uganda 33 44 50 42 Ukraine 58 93 69 73 United Arab Emirates 33 66 37 45 United Kingdom 33 42 9 28 United States 33 29 5 22 Uruguay 58 56 3 39 Uzbekistan 46 69 50 55 Venezuela, RB 78 88 60 75 Vietnam 43 77 48 56 Yemen, Rep. of 33 66 28 43 Zambia 33 64 40 46 Zimbabwe 33 22 26 27 I i i i I I i i i i 21. WOLDw BnK WBv:S rIcTE:s .. ZOOZ'o}oD nJeseLt IueE PIJ°M O * H * z_- f * -i S* wA _ * _. ** 0 - .0~~~1-//r S~ ~ ~~.'''1 S S~~~~~~1.,r * ~~ ~ ~ ~ ..__._ .__ ;'1 F -4 -Y O World Bank. 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