D Cooperating with perspective: KfW Palmengartenstrasse 5-9, 60325 Frankfurt am Main, Germany Postfach 11 11 41, 60046 Frankfurt am Main, Germany Phone (+49-69) 7431 0, Fax (+49-69) 7431 2944 www.kfw.de SEVENTH EVALUATION REPORT ON PROJECTS AND PROGRAMMES IN DEVELOPING COUNTRIES SEVENTH EVALUATION Press Department Phone (+49-69) 7431 4400 Information Centre Phone (+49-1801) 335577, Fax (+49-69) 7431 64355 e-mail: [email protected] Berlin Branch Charlottenstrasse 33/33a, 10117 Berlin, Germany Phone (+49-30) 20264 0 building on opportunities. November 2002 Seventh evaluation report on projects and programmes in developing countries 183282 D KfW AT A GLANCE KfW OFFICES AND COORDINATION OFFICES Kabul, Afghanistan New Delhi, India Lima, Peru Director: Martin Jenner Director: Andrea Johnston Director: Michael Wehinger Brussels, Belgium Jakarta, Indonesia Beijing, PR of China Director: Stephan Sellen Director: Jens Clausen Director: Dr. Karl-Joachim Trede La Paz, Bolivia Amman, Jordan Belgrade, Serbia Director: Michael Wehinger Director: Reinhard Schmidt Director: Marc Engelhardt Sarajevo, Bosnia and Herzegovina Nairobi, Kenya Johannesburg, South Africa THE KfW GROUP: Director: Frank Bellon Director: Oskar von Maltzan Director: Beate Baethke PROVIDING SUPPORT WITH BANKING EXPERTISE Brasília, Brazil Pristina, Kosovo Dar es Salaam, Tanzania Director: Dietmar Wenz Director: Dr. Johannes Feist Local Representative: Christian Natusch Abidjan, Côte d’Ivoire Podgorica, Montenegro Ankara, Turkey The KfW Group gives impetus to economic, social and ecological development on a global scale. As Director: Bruno Schoen Director: Dr. Johannes Feist Director: Burkhard Hinz bankers we strive to work efficiently every day. As promoters we stand for the sense and sustainability of Cairo, Egypt Managua, Nicaragua Hanoi, Vietnam Director: Jan Blum Director: Helge Jahn Director: Dr. Klaus Mueller our actions. The fruit of our work flows back into our promotional activities and ensures our potential to Guatemala City, Guatemala Al Bireh, Palestinian Territories provide support in the long term. We have been proving our competence for more than 50 years. With Director: Helge Jahn Director: Reinhard Schmidt long-term, low-interest loans KfW supports, among others, small and medium-sized enterprises (SMEs), which are the backbone of the German economy. Investment Finance: As a partner of SMEs we support innovations and are committed to the instru- ment of equity capital. In so doing we rely on long-term loans and on innovative financing mechanisms such as securitization programmes and global loans. Together with IKB Deutsche Industriebank AG we are developing new products for SME finance. Housing Finance: As Germany’s leading promotional bank, KfW is also the main financier of pri- vate housing property. KfW gives many people the opportunity to realize their dream of owning their own four walls, or to modernize their home. In accordance with our comprehensive focus on the environment we are particularly pleased to finance construction projects that make ecological sense. IMPRINT Environmental Protection: Our programmes aim to protect the atmosphere and improve the cli- mate on our planet. This is accomplished through, for example, the financing of clean energy generation, Published by: KfW, Corporate Communication Department renewable energies or construction measures that reduce CO2 emissions. Edited by: Evaluation Department of Financial Cooperation Export and Project Finance: KfW is one of Germany’s largest providers of financing for exports of Contact: capital goods. It finances exports of aircraft and ships as well as machines and other equipment all over Prof. Dr. H. R. Hemmer (First Vice President) Rüdiger Hartmann (Vice President) the world. KfW is also involved with project finance, for instance in the areas of industry and transport Phone: +49-69-74 31-35 37 infrastructure. Fax: +49-69-74 31-45 15 Graphic design/Typesetting: Brönners Druckerei Breidenstein and Financial Cooperation with Developing Countries: On behalf of the German federal government KfW, Frankfurt am Main KfW finances investments and project-related advisory services in developing countries, which then sup- Printing: port the sustained expansion of the economic and social infrastructure and make environmental and Brönners Druckerei Breidenstein, Frankfurt am Main resource conservation measures possible. Our partners in cooperation are foreign governments and pub- Photos: licly owned institutions. ABB, Mannheim, p. 11 DKT Philippines, p. 40 Siemens Financial Services GmbH, p. 44 Corporate Finance in Developing Countries: Our subsidiary DEG is committed to building up and KfW photo archives, pp. 11, 20, 23, 24, 25, 31, 32, 42 expanding efficient private companies in developing countries. DEG operates according to principles of Photographs by the following members of our staff private enterprise: the projects have to be not only environmentally friendly and developmentally sound, were used from the KfW photo archives: Carla Berke, p. 5 but also economically viable. Ernst von Collenberg, p. 9 Dr. Klaus Glaubitt, p. 19 Detlev Gielow, pp. 7, 35, 36, 58 We have since developed more than ever into a strategic partner for the economy and the govern- Dr. Jörg Hartmann, p. 27 Burkhard Hinz, pp. 14, 21, 22 ment. As an advisor to the federal government we offer our expertise in the privatization of federally Volker Karl, p. 28 Norbert Kliver, p. 4 owned companies. On behalf of the government we also handle agency business for the Federal Agency Werner Neuhauß, p. 12 Fritz Rosskopf, p. 59 for Special Tasks associated with Unification (Bundesanstalt für vereinigungsbedingte Sonderaufgaben, Boris Sakrauski, p. 6 BvS) and the Compensatory Fund of Securities Trading Companies (Entschädigungseinrichtung der Wert- Hanno Sonntag, p. 38 Michael Wehinger, p. 46 papierhandelsunternehmen, EdW). Dr. W. Weth, pp. 11, 18 TABLE OF CONTENTS Foreword 2 Preface 3 Summary 4 Overall Evaluation Table: The Overall Developmental Result 6 Table: Comparison of Success Rates in Previous Financial Cooperation Evaluation Reports 7 Table: Shares of Successful Operations by Sector 8 Table: Shares of Successful Operations by Region 10 Chart: Sectoral Distribution of Operations 13 1. Chart: Regional Distribution of Operations 13 Text Box: DEG’s Corporate Policy Project Rating 15 Map: Partner Countries of Financial Cooperation 16 Efficient financial sectors – an important basis for the development of an economy 18 Table: Evaluation of the Financial Sector Operations 25 Text Box: Elements of Suitable Lending Techniques for SMEs 26 2. Text Box: Evaluating DEG’s Microfinance Portfolio 29 Project Examples Bangladesh 34 Pakistan 37 The Philippines 39 The Republic of Chad 41 3. Tunisia 43 Peru 45 Appendix Table: Financial Sector 48 Tables: Producing Sector 49–50 Tables: Environmental Protection and Resource Conservation 50 Tables: Social Infrastructure 51–52 Table: Structural and Sector Adjustment Programmes 53 Tables: Economic Infrastructure 54–56 A The Criteria for Evaluating Project Performance 57 Abbreviations 60 1 FOREWORD Development policy helps to ensure a common future for everyone in the world. Our most important task is to cre- ate more dignified living conditions and to reduce poverty in the developing countries. In this respect there is no alter- native. In an increasingly interconnected world no one can shut out the problems in other countries and regions for long. In past years development policy has increasingly moved back into the public eye. Yet citizens want to know just how successful our de- velopment policy is. They expect that our projects and pro- grammes are reviewed as objectively and as independently as possible, and that the proper conclusions are being drawn from the evaluation results. We take this task very seriously. For this reason evaluations and evaluation reports are the core elements of performance evaluation and accountability, not just in the field of Financial Coopera- tion but also for all instruments of German development policy. This seventh evaluation report of KfW shows that nearly 75% of Financial Cooperation projects have developmental effect and are thus successful; but the report also addresses weaknesses. Interpreting the results of our own work so openly not only ensures the necessary diligence in spending public funds; the experiences gained and the conclusions that can be drawn from them are si- multaneously the basis for the efficient implementation and improved effectiveness of future projects. I thank KfW for its committed and successful work in the field of German Development Coopera- tion that is documented by this report. Heidemarie Wieczorek-Zeul, Federal Minister for Economic Cooperation and Development 2 PREFACE The World Summit on Sustainable Development in Johannesburg has shown how great the challenge is to ensure a life in dignity free of grinding poverty for a constantly growing population without at the same time destroying the bases of life for future generations. However modest its contributions may be in the face of the global dimension of the problem - international development cooperation after all has shown that there actually are ways of solving the pressing global issues such as protecting the earth’s climate and natural resources, containing diseases such as AIDS, malaria and tuberculosis, and providing for education for all the world’s children. Against this background the general public as well as political decision-makers in recent years have again become