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Impact Assessment on decision
taking by world bank: observation
from the trade point of view
Submitted toMd. Thoufiqul Islam
Assistant Professor
Department of Management Studies
University of Dhaka
Submitted by
2
Name ID
Sharmin Aktar 116
Mazharul Islam 126Bappy Sharker 142
Mintu Kumar Debnath 155
Tahmina Binte Rahman 165
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Department of Management StudiesUniversity of Dhaka
Date of Submission:26th April , 2010
All praises are due to the Almighty Allah without whose kind blessings, it
would not be possible to complete the Term paper. In the process of
preparing the Term paper, I received valuable inputs, guidance, assistance
and instructions from a number of respected persons. I would like to express
my gratitude and sincere thanks to those persons for their immense help and
enormous cooperation.
First of all, I would like to convey my gratitude to my honorable courseteacher Md. Thoufiqul Islam, who has given us the opportunity of
preparing such kind of term paper on Impact Assessment on
decision taking by world bank: observation from the trade point
of view
We also express our sincere thanks to MD. Sajedul Karim MBA-11 Batch, who
has given us valuable inputs and guidance during preparing the Term paper.
3
Acknowledg
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LETTER OF TRANSMITTAL
26th April 2010
ToMohammad Thoufiqul IslamAssistant ProfessorDepartment of Management StudiesUniversity of Dhaka.
Subject: Submission of Term paper
Dear Sir,
In the enclosed, we have prepared a Term paper on Impact assessment
on decision taking by World Bank: observation from the trade point
of view, which you have authorized us to prepare and submit by 26th April
2010 as MGT-310 course requirement.
We enjoyed preparing this Term paper though it was challenging to finish
within the given time. In preparing this Term paper, we have tried our level
best to include all the relevant information related to World Bank.
So, we therefore hope that, the Term paper covers the entire requirementyou needed and you will find it in proper order.
Sincerely,
Bappy Sharker
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(On behalf of my group members)
Table of Contents
5
Contents Page
AbstractIntroduction
Objectives
Methodology
FindingsThe World Bank
World Bank Group Institutions
Member Countries Decision Making
Some Recent World Bank Projects
World Bank Fiscal Year Highlights 2009
World Bank Group Assistance
COLLABORATING TO RESPOND TO THE GLOBAL
The World Bank Group Institutions Summary
Millennium Development Goals
SPURRING TRADE AND DEVELOPING THE
Financial and Private Sector Development
World Bank: Action in the field
DiscussionThe Bank in the 21st Century
Programs of the World BankWhy World Bank Programs Fail
Development without World Bank
CONCLUSIONReferences
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Abstract
This paper analyses the impact of World Bank on the international trade. The
World Bank is a vital source of financial and technical assistance to
developing countries around the world. The World Bank was originally
established to support reconstruction in Europe after World War II, but has
since reframed its mission and expanded its operations both geographically
and substantively. Today, the Bank's mission is to reduce poverty. It has185 member countries and provides over $24 billion annually for activities
ranging from agriculture to trade policy, from health and education to energy
and mining. The World Bank provides funding for bricks-and-mortar projects,
as well to promote economic and policy prescriptions it believes will promote
economic growth.
Since inception in 1944, the World Bank has expanded from a single
institution to a closely associated group of five development institutions. At
any given moment in locations around the globe, people are engaged in
development projects designed to improve living standards and reduce
poverty. Last year, the World Bank provided $46.9 billion for 303 projects in
developing countries worldwide, with our financial and/or technical expertise
aimed at helping those countries reduce poverty. The Bank is currently
involved in more than 1,800 projects in virtually every sector and developing
country. The projects are as diverse as providing microcredit in Bosnia and
Herzegovina, raising AIDS-prevention awareness in Guinea, supporting
education of girls in Bangladesh, improving health care delivery in Mexico,
and helping East Timor rebuild upon independence and India rebuild Gujarat
after a devastating earthquake.The Bank has been actively supporting Trade Facilitation. The Bank has
considerably stepped up its analytical and lending activities to promote trade
integration. Given its development focus, the World Bank has developed a
cross-cutting approach to Trade Facilitation in order to effectively address
the bottlenecks and inefficiencies of developing countries supply chains. The
Bank supports its constituencies efforts of Trade Facilitation reforms through
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worldwide initiatives, and by helping to mainstream Trade Facilitation at the
country or regional levels. In order to build constituencies for Trade
Facilitation, the Bank is working closely with other organizations such as the
IMF, WTO, UNCTAD, WCO, and UNECE to disseminate knowledge and help
policy makers and stakeholders from developing countries to better
understand the stakes and the roadmap to trade facilitating reforms. The
World Bank is also responding to an increasing demand for more analytical
work and project lending related to Trade Facilitation.
With respect to the Bank, we find that the number of projects has a positive
impact on overall economic freedom, while the effect of the amount of World
Bank credits appears to be negative.
Keywords
1. Incorporation of World Bank2. Total loan disbursement in 2009
3. World bank in poverty alleviation
4. World Bank in structural development
5. Trade facilitation by world Bank
Introduction
In the past time, trades between two countries were not possible. But now-a-
days, its possible for the blessings of globalization. Trade, now conducted
not within a country but with a great diversification, large periphery. It is not
confined in a country or a group of countries. Various types of organization in
the world working for smooth flow of international trade. World Bankis one
of them. In international trade, these organizations have immense
contribution. Various decisions or steps these organizations take which have
great impact on international trade or international finance. One effectivedecision or steps can change the future of a country.
World Bank is an important decision maker for international trade regarding
developing and under-developed countries. Its main objectives are economic
and social development and to reduce the poverty to lend the money to
developing or poor countries. World Bank is a development institution whose
goal is to reduce poverty by promoting sustainable economic growth in its
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client countries. Development is a long-term process which ultimately
involves the transformation of whole societies. It is about getting economic
and financial policies right. But it is also about empowering the people,
building the roads, writing the laws, recognizing the women, educating the
girls, eliminating the corruption, protecting the environment, inoculating the
children - and much, more. The main reason to prepare this paper is to
analyze the impact of decision making of World Bank in international
business.
Literature Review
Axel Dreher (2002). The Development and Implementation of IMF and World
Bank Conditionality. HWWA. ISSN 1616-4814.
William Easterly (2001). The Elusive Quest for Growth. MIT Press. ISBN0-262-
55042-3.
Catherine Caufield (1997). Masters of Illusion. Henry Holt & Company, New York.
ISBN0-8050-2875-7 (hardcover) ISBN 0-330-35321-7 (paperback, 1998).
Bruce Rich (1994). Mortgaging the Earth. Beacon Press. ISBN0-8070-4704-X(hardcover), ISBN 0-8070-4707-4 (paperback).
Walden Bello, et al. (1999). Dark Victory. Pluto Press. ISBN0-7453-1466-X
(hardcover) ISBN 0-935028-61-7 (paperback).
Paul McClure (editor) (2003).A Guide to the World Bank. World Bank
Publications. ISBN0-8213-5344-6.
Elizabeth P. McLellan (editor) (2003). The World Bank: Overview and Current
Issues. Nova Science Publishers. ISBN1-59033-550-3.
Phillipe Le Prestre (1989). The World Bank and the Environmental Challenge.
Susquehanna University Press. ISBN0-941664-98-8.
Ansel Webb (1994). The World Bank Is Closed. NCSU Term Paper. ISBN none.
8
http://econwpa.wustl.edu/eps/if/papers/0207/0207003.pdfhttp://econwpa.wustl.edu/eps/if/papers/0207/0207003.pdfhttp://en.wikipedia.org/wiki/William_Easterlyhttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-262-55042-3http://en.wikipedia.org/wiki/Special:BookSources/0-262-55042-3http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8050-2875-7_(hardcover)_ISBN_0-330-35321-7_(paperback,_1998)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8070-4704-X_(hardcover),_ISBN_0-8070-4707-4_(paperback)http://en.wikipedia.org/wiki/Special:BookSources/0-8070-4704-X_(hardcover),_ISBN_0-8070-4707-4_(paperback)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-7453-1466-X_(hardcover)_ISBN_0-935028-61-7_(paperback)http://en.wikipedia.org/wiki/Special:BookSources/0-7453-1466-X_(hardcover)_ISBN_0-935028-61-7_(paperback)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8213-5344-6http://en.wikipedia.org/wiki/Nova_Science_Publishershttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/1-59033-550-3http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-941664-98-8http://econwpa.wustl.edu/eps/if/papers/0207/0207003.pdfhttp://econwpa.wustl.edu/eps/if/papers/0207/0207003.pdfhttp://en.wikipedia.org/wiki/William_Easterlyhttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-262-55042-3http://en.wikipedia.org/wiki/Special:BookSources/0-262-55042-3http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8050-2875-7_(hardcover)_ISBN_0-330-35321-7_(paperback,_1998)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8070-4704-X_(hardcover),_ISBN_0-8070-4707-4_(paperback)http://en.wikipedia.org/wiki/Special:BookSources/0-8070-4704-X_(hardcover),_ISBN_0-8070-4707-4_(paperback)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-7453-1466-X_(hardcover)_ISBN_0-935028-61-7_(paperback)http://en.wikipedia.org/wiki/Special:BookSources/0-7453-1466-X_(hardcover)_ISBN_0-935028-61-7_(paperback)http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-8213-5344-6http://en.wikipedia.org/wiki/Nova_Science_Publishershttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/1-59033-550-3http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-941664-98-8 -
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Sebastian Mallaby (2004). The World's Banker: a story of failed states, financial
crises, and the wealth and poverty of nations. Penguin Press HC. ISBN1-59420-023-
8.
Zoe Young (2002).A New Green Order? The World Bank and the Politics of the
Global Environment Facility. Pluto Press. ISBN0-7453-1553-4.
John Perkins (2004). Confessions of an Economic Hit Man. Ebury Press. ISBN0-
452-28708-1.
ObjectivesThe main objective of the paper is to comprehensive study on World Bank
and to find out the impact of its decision taking. We also tried to find out to
what extent it is successful to achieve its goals. The prime objectives of this
report are as follows:
1. To assess the impact of World Banks decision on international trade
2. To examine the contribution of world bank in poverty reduction
3. To examine the eradication of corruption by world bank in
underdeveloped countries
4. The after effect of its Structural Adjustment Programme(SAP)
Methodology
This report is totally based on secondary data. World Bank has a resourcefulwebsite. On the other hand every year World Bank published different kinds
of report like the World Bank report, world human development report etc.
We took helps from different books. As our required information from
secondary data were available so we did not sought for any primary data.
First of all we tried to analyze the different programmes taken by World Bank
for poverty reduction and economic development. Then we tried to find out
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http://en.wikipedia.org/w/index.php?title=Sebastian_Mallaby&action=edit&redlink=1http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/1-59420-023-8http://en.wikipedia.org/wiki/Special:BookSources/1-59420-023-8http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-7453-1553-4http://en.wikipedia.org/wiki/John_Perkins_(author)http://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Manhttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-452-28708-1http://en.wikipedia.org/wiki/Special:BookSources/0-452-28708-1http://en.wikipedia.org/w/index.php?title=Sebastian_Mallaby&action=edit&redlink=1http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/1-59420-023-8http://en.wikipedia.org/wiki/Special:BookSources/1-59420-023-8http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-7453-1553-4http://en.wikipedia.org/wiki/John_Perkins_(author)http://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Manhttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/0-452-28708-1http://en.wikipedia.org/wiki/Special:BookSources/0-452-28708-1 -
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the out comes of such kind of programmes. The pie chart are used for data
analysis.
Data collection:
The secondary sources of data we used to prepare this report are given
below:
1. World bank website
2. Different publications about world bank
3. Book: The world bank since Bretton woods by Edward S. Mason &
Robert E. Asher
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The World Bank
Created at the Bretton Woods
Conference in 1944, The World
Bank Group is comprised of five
agencies that make loans or
guarantee credit to its 177 member countries. In addition to financingprojects such as roads, power plants and schools, the Bank also makes loans
to restructure a country's economic system by funding structural adjustment
programs (SAPs). The Bank manages a loan portfolio totaling US$200 billion
and last year loaned a record US$28.9 billion to over 80 countries.
The founding principles
The Bank and its officers shall not interfere in the political affairs of any
member nor shall they be influenced in their decisions by the political
character of the member or members concerned. Only economicconsiderations shall be relevant to their decisions...
The Bank quickly established various impartial principles that continue to
govern its work and which have helped to ensure that, to this day, its
borrowers has always repaid in full:
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Interest rates must be related to borrowing costs; the same rate applies
to all borrowers for all loans granted at any given time, regardless of
creditworthiness.
Supervision is required by the Articles and thus the Bank ensures that
the loans are used only for the purposes for which they were intended.
Each borrower must provide a negative pledge, undertaking not to
secure international debt in a way that gives any lender preference over
another.
Expansion 1950s
During the 1950s, the Bank expanded considerably and its lending began tosupport the foundation of institutions within countries for development
purposes. It was during this decade that the Banks present focus on
development first became apparent, as further development agencies were
set up under the Banks umbrella as affiliates. These include the
International Financial Corporation (IFC), the International Development
Association (IDA) and the Economic Development Institute (EDI). The IBRD
remains the largest agency within the World Bank Group and its earnings
now help to fund the others.
This decade of expansion can also be marked in monetary as well asinstitutional terms: in 1959 the IBRD increased its capital for the first time, to
$21 billion.
Maturity and focus on development (1960s
1990s)
The Banks activities and investments continued to diversify and by the early
1970s, it had made loans in a number of politically-charged sectors, such as
nuclear power, pollution control and family planning. By this stage, its single
largest area of investment was agriculture, marking a policy shift from its
focus on infrastructure projects that had dominated its earlier programme
and arguably reflecting its greater focus on poorer countries development.
In 1978, the Bank published its first World Development Report. This has
since emerged as an annual flagship publication; its major themes are
accelerating growth and alleviating poverty.
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Despite this policy shift, the Bank does not see itself as a charity. Its
response to the deteriorating outlook for developing countries arising out of
the global financial crises of the 1970s was to innovate a new lending
approach known as Structural Adjustment Programmes. In exchange for
funding, governments agreed to stabilize their nations economies by
adopting the prescriptive policies laid down by the Bank such as reducing
government spending, lowering inflated exchange rates and encouraging
free trade by reducing tariff barriers and subsidies. Such policies also
promoted privatization and market rather than command economies.
There were claims that this contravened the Banks overarching ban on
political considerations (as mentioned above), but the Bank contended that
these were valid factors that have to be taken into account when making a
decision about investment or wider involvement.
Today, the IBRD is funded mainly by the issuance of World Bank bonds in the
international markets. Because of its borrower AAA rating, the Bank can
raise funds cheaply and, as a not-for-profit organization, it passes these
savings onto its borrowers, as well as to the IDA. In the fiscal year 2009,
World Bank lending amounted to over $30 billion.
Membership of the World Bank Group
A country must join the International Monetary Fund (IMF) in order to
become a member of the IBRD, and membership of the other institutions of
the World Bank Group is conditional upon membership of the IBRD.
World Bank Group Institutions
The International Development Association (IDA)
The IDA is the part of the World Bank that helps the worldspoorest
countries. Established in 1960, the IDA aims to reduce poverty by providing
interest-free credits and grants for programs that boost economic growth,
reduce inequalities and improve peoples living conditions.
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The IDA has 166 members, 82 of whom are the worlds poorest countries,
and as the world's largest source of interest-free loans and grant assistance
to such countries, helps countries to achieve the Millennium Development
Goals. The loans are typically repayable within 30-40 years, with a 10-year
initial grace period before any payment is due at all. The IDA loans money on
concessional terms (known as credits) to countries that are unable to borrow
from the IBRD or commercial markets. IDA also spends around 20 per cent of
its funds on grants to countries at risk of debt distress. Since its inception,
IDA credits and grants have totaled US$182 billion, averaging US$10 billion a
year in recent years and directing the largest share, about 50%, to Africa.
The IDA accounts for nearly 40% of the Banks total lending.
The International Bank for Reconstruction andDevelopment (IBRD)
The IBRD is a market based non-profit organization which provides loans and
development assistance to middle-income and credit-worthy lower income
countries. The IBRD is structured like a cooperative, owned and operated for
the benefit of its member countries with the aim of reducing poverty in
middle income (i.e. a per capita income of c. US$1,000 to US$10,000) and
credit worthy poorer countries (whereas low-income countries are
eligible to receive low or no interest loans and grants from the IDA).
Countries that borrow from the IBRD have more time to repay the money
than if they borrowed from a commercial bank. Unlike commercial banks, theIBRD is driven by development impact rather than profit maximization. The
IBRD has also supported middle-income countries in times of crisis when
their access to capital has dried up.
The IBRD provides its members with financial products, knowledge and
technical services and strategic advice, while using its capacity to call
members together to discuss ways to further their specific development
objectives. It works closely with the IFC, MIGA, the IMF and other multilateral
development banks; and collaborates with foundations, civil society partners
and donors.
The International Finance Corporation (IFC)
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The IFC was set up in 1956 and has 179 member countries. It is the private
sector arm of the World Bank Group and is legally and financially
independent of the rest of the Group. The IFC promotes growth in the
developing world by financing private sector investment and providing
technical support and advice to government and business. In partnership
with private sector investors, the IFC provides loans and equity finance for
business ventures in developing countries, advisory assistance, (primarily to
governments) on private sector participation in infrastructure and other
public services, and the restructuring of state-owned enterprises.
The IFC may provide finance for a company with some government
ownership, provided there is private sector participation and the venture is
run on a commercial basis. The IFC does not lend directly to micro, small,
and medium enterprises or individual entrepreneurs and does not accept
government guarantees for its financing, (although its work often requires
close cooperation with government agencies in developing countries). The
IFC seeks partners for joint ventures and raises additional financing by
encouraging other institutions to invest in IFC projects.
Multilateral Investment Guarantee Agency (MIGA)
Set up in 1988, MIGAs mission is to promote foreign direct investment
into developing countries to help support economic growth and reduce
poverty. It encourages foreign investment in developing countries byproviding guarantees against losses caused by non-commercial risk. MIGA
issues guarantees for periods of up to 15 to 20 years. The minimum length of
a guarantee is three years. In guarantees that cover loans, MIGA usually
issues coverage to match the length of such loans. MIGA now has 172
member countries and has issued nearly 900 guarantees worth more than
$17.4 billion for projects in 96 developing countries.
MIGA specializes in facilitating investments in high-risk, low-income
countries, such as Africa or conflict-affected areas. By partnering with the
World Bank and others within the World Bank Group, MIGA is able to
leverage finance for guarantee trust funds. MIGA also focuses on supporting
complex infrastructure projects and promoting investments between
developing countries. In addition, it provides technical support to help
developing countries promote investment opportunities and provides legal
expertise to reduce barriers to investment.
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International Centre for the Settlement ofInvestment Disputes (ICSID)
ICSID is an autonomous international institution established under the
Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (the ICSID Convention or the Washington
Convention), with the primary purpose of providing facilities for conciliation
and arbitration of international investment disputes. ICSID is an impartial
forum assisting the resolution of legal disputes between eligible parties,
through conciliation or arbitration procedures. Recourse to ICSID conciliation
and arbitration is entirely voluntary. However, once the parties have
consented to arbitration under the ICSID Convention, neither can unilaterally
withdraw its consent. Moreover, all ICSID contracting states, whether or notparties to the dispute, are required by the Convention to recognize and
enforce ICSID arbitral awards.
Member Countries Decision Making
Member countries govern the World Bank through a Board of Governors and
Executive Directors.
Voting
The World Bank and the IMF have adopted a weighted system of voting. Aquota is assigned by the IMF on the basis of the size of its economy(equivalent to the country's subscription to the Fund) and this determines itsvoting power and the number of shares allotted to each new membercountry of the Bank. Each new member country of the World Bank is allotted250 votes plus one additional vote for each share it holds in the World Bank'scapital stock.
Board of Governors
The governments of the shareholding countries are represented by a Boardof Governors who meet at an annual meeting and have ultimateresponsibility for making all decisions. The World Bank Group has four boards(there is a board for each of the IBRD, the IDA, the IFC and MIGA), who meetseparately or jointly as business requires.
Operational control - Executive Directors
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The Executive Directors representing the 185 member countries areresponsible for the day-to-day conduct of the general operations of the Bankand exercise all the powers delegated to them by the Board of Governors.The Executive Directors consider and decide on IBRD loans, IDA credits andgrants, IFC investments, MIGA guarantees, and they determine policy issues
that guide the general operations of the Bank. In addition, the ExecutiveDirectors are alsoresponsible for annually presenting the audited accounts/administrative budget and the annual reports on the Bank's operations andpolicies to the Board of Governors.
Of 24 Executive Directors, 5 are appointed by the US, Japan, Germany,
France and the UK (being the biggest shareholders in the Bank); the
remaining 19 Executive Directors represent the other member countries and
are elected every 2 years.
The Executive Directors select a Presidentwho serves as Chairman of theBoards. The President is, by tradition, an American (whereas by traditionEurope chooses the head of the IMF) and is elected for a five year term.Currently, this position is held by Robert Zoellick.
Some Recent World Bank Projects
Summaries of Operations Approved during Fiscal 2009,
South Asia
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Summaries of Operations Approved during Fiscal 2009,
Africa
18
Country/Project name Total Cost
BangladeshFood Crisis Development Support Development Policy
Credit$130 million.
Siddhirganj Peaking Power Specific Investment Credit $470 million.
Dhaka Water Supply and Sanitation Specific
Investment Credit$165.7
million.
India
Orissa Rural Livelihoods Specific Investment Credit $90.5
million.
Coal Fired Generation Rehabilitation Specific
Investment Loan$303.4
million.
Third Uttar Pradesh Sodic Lands Reclamation Specific
Investment Credit$272 million.
PakistanPoverty Reduction and Economic Support
Development Policy Credit$500 million.
Punjab Education Sector Specific Investment Credit $3.3 billion.
Social Safety Net Technical Assistance Project
Technical Assistance Credit$60 million.
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Summaries of Operations Approved during Fiscal 2009,
East Asia and Pacific
Country/project name Total Cost
China
19
Country/project name Total Cost
AfricaCentral Africa 3A CEMAC Regional Institutions
Support Specific Investment Credit/Grant$81.6
million.
West and Central Africa Air Transport Phase II B
Adaptable Program Credit/Grant$18 million.
Second Lake Victoria Environmental Management
Adaptable Program Credit$114.8
million.
Kenya
Northern Corridor Transport Improvement Additional
Financing of Specific Investment Credit$355.3
million
Energy Sector Recovery Project Additional Financing
of Specific Investment Credit$80 million.
Agricultural Productivity and Agribusiness Adaptable
Program Credit$98.5
million.
Nigeria
Community and Social Development Specific
Investment Credit$380 million.
Electricity and Gas Improvement Specific Investment
Credit$600 million.
Second HIV/AIDS Program Development Specific
Investment Credit$230 million.
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Eco-Farming Specific Investment Loan $439.7
million.
Wenchuan Earthquake Emergency Recovery Loan $740
million.
Yunnan Urban Environmental Second Specific
Investment Loan
$191.2
million.
Indonesia
Second Infrastructure Development Policy Loan $200
million.
Tax Administration Reform Specific Investment Loan $146.1
million.
Public Expenditure Support Facility Development
Policy Loan
$2 billion.
Vietnam
Agriculture Competitiveness Specific Investment
Credit
$75 million
Financial Sector Modernization and Information
Management System Specific Investment Credit
$71.8
million.
Eighth Poverty Reduction Support Operation
Development Policy Credit
$350
million.
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Summaries of Operations Approved during Fiscal 2009,
Europe and Central Asia
Country/project name Total Cost
Croatia
Development of Emergency Medical Services and
Investment Planning (DEMSIP) Specific Investment
Loan
$132.7
million.
Second Coastal Cities Pollution Control Project
Adaptable Program Loan
$181.4
million.
Rijeka Gateway II Specific Investment Loan 88 million.
Armenia
Lifeline Roads Improvement (LRIP) Emergency
Recovery Credit
$30.4
million.
Access to Finance for Small and Medium Enterprises
Financial Intermediary Loan
$50 million.
Rural Enterprise and Small-Scale Commercial
Agriculture Development Emergency Recovery Credit
Additional Financing
$2.1 million.
Bulgaria
Social Inclusion (SIP) Specific Investment Loan 136.7
million.
Second Social Sector Institutional Reform
Development Policy Loan
$150
million.
Third Social Sector Institutional Reform Development
Policy Loan
$200
million.
Summaries of Operations Approved during Fiscal 2009,
Latin America and the Caribbean
Country/project name Total Cost
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Argentina
Mining Environmental Restoration Specific Investment
Loan
$34.2
million.
Second Provincial Agricultural Development Specific
Investment Loan
$423.8
million.
Unleashing Productive Innovation Specific Investment
Loan
$224
million.
Brazil
Second Provincial Agricultural Development Specific
Investment Loan
$59.4
million.
Brazil Health Formation and Quality Improvement
Adaptable Program Loan
$676.8
million.
Ceara Inclusive Growth (SWAP II) Adaptable Program
Loan
$2.4 billion.
Mexico
Mexico Information Technology (IT) Industry
Development Specific Investment Loan
$80 million.
Savings and Rural Finance Second Phase Specific
Investment Loan
$105.6
million.
Private Housing Finance Markets Strengthening
Specific Investment Loan
$1.01
billion.
Summaries of Operations Approved during Fiscal 2009,
Middle East and North Africa
Country/project name Total Cost
Jordan
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Amman Solid Waste Management Specific Investment
Loan
$40.5
million.
Higher Education Reform for the Knowledge Economy
Specific Investment Loan
$65 million.
Second Education Reform for the Knowledge Economy
Specific Investment Loan
$408
million.
Egypt
Ain Sokhna Power Specific Investment Loan $2.1 billion.
National Railways Restructuring Specific Investment
Loan
$305
million.
TunisiaIntegration and Competitiveness Development Policy
Loan
$250
million.
Second Water Sector Investment Specific Investment
Loan
$162.9
million.
Scaling Up Energy Efficiency and Renewable
Investment Specific Investment Loan
$55 million.
World Bank Fiscal Year Highlights 2009
The World Bank Group, among the worlds largest development institutions,
is a major source of financial and technical assistance to developing
countries around the world. Its member institutionsthe International Bank
for Reconstruction and Development (IBRD), the International Development
Association (IDA), the International Finance Corporation (IFC), the Multilateral
Investment Guarantee Agency (MIGA), and the International Centre for
Settlement of Investment Disputes (ICSID)work together and complementeach others activities to achieve their shared goals of reducing poverty and
improving lives. The Bank Groups purpose is to advance ideas about
international projects on trade, finance, health, poverty, education,
infrastructure, governance, climate change, and more to benefit all people in
developing countries, especially the poor seeking new opportunities.
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The passing of the Millennium Development Goals midpoint is a strong
reminder that the international community must remain focused on meeting
the basic needs of the worlds impoverished peoples. For the Bank Group,
this means providing funding and technical assistance as well as redoubling
efforts to improve service delivery and help countries strengthen
investments in recovery and development projects.
The global economic crisis heightens the need for action. To prevent it from
wiping out decades of developmental progress, the Bank Group has
increased efforts to protect the most vulnerable in the poorest countries,
maintain long-term infrastructure investment programs, and sustain private
sectorled economic growth and employment creation. It is also ramping up
work to help governments strengthen their health systems, promoting
innovative community based practices to deal with global challenges such as
HIV/AIDS and malaria.
World Bank Group AssistanceIn fiscal 2009, the World Bank Group sponsored 767 projects with a total
commitment of $58.8 billion, distributed in credits, loans, grants, and
guarantees. This fiscal years funding marks a 54 percent increase over the
previous fiscal year and a record high for the Bank Group. Commitments
from IDA totaled a record $14 billion for operations in 63 low-income
countries, a 25 percent increase from $11.2 billion in fiscal 2008. IBRD
committed $32.9 billion for 126 projects in middle-income and creditworthy
low-income countries, a 144 percent increase over the $13.5 billioncommitted in fiscal 2008. IBRD is able to commit about $100 billion through
fiscal 2011 to raise the living standard of the poor, support countries facing
large budget shortfalls, and help sustain long-term investment projects. As
the largest provider of multilateral financing for the private sector in the
developing world, IFC committed $10.5 billion for its own account and
mobilized an additional $4 billion in fiscal 2009, funding 447 projects that
support sustainable private enterprises in developing and transition
economies. MIGA issued guarantees totaling $1.4 billion for 26 projects in
developing countries.
COLLABORATING TO RESPOND TO THE GLOBALFINANCIAL CRISIS
Joint projects and programs by the Bank Groups institutions focus on
promoting sustainable development by expanding financial markets, issuing
guarantees to investors and commercial lenders, and providing advisory24
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services to create better investment conditions in developing countries. The
shared priorities of the Bank and IFC led to 104 active advisory projects in
IDA countries in fiscal 2009, up from 78 in fiscal 2008. This collaboration also
resulted in commitments for 14 investment projects (with 33 others in the
pipeline) in IDA countries in fiscal 2009. These initiatives reinforce strong
public-private partnerships, which are particularly important during the
current global economic crisis. More than half of the 447 investment projects
IFC initiated in fiscal 2009 were in IDA countriesa portfolio distribution that
will help move IFC toward meeting its mandate to implement half of its
projects in IDA countries by fiscal 2011. In addition, IFC is working on a series
of initiatives to support projects in the banking, trade, small- and medium-
size enterprise, and infrastructure sectors in IDA countries. These initiatives
are expected to total about $30 billion over the next three years.
IFCs $450 million additional contribution to the 15th Replenishment of IDA
(IDA15) in fiscal 2009, as part of IFCs IDA15 commitment totaling $1.75billion, improved collaborative efforts to create better living conditions in
developing countries, especially in Africa. In support of the human
development targets of the Millennium Development Goals, IDA15 will make
$42 billion available to 78 of the worlds poorest countries over fiscal 2009
11.
The Bank Groups investment projects are aimed largely at improving
infrastructure services associated with poverty reduction and enhanced
growth. In fiscal 2009, the Bank Group committed $20.7 billion to
infrastructure, a critical sector to provide the foundation for rapid recovery
from the crisis and to support job creation. The Sustainable Infrastructure
Action Plan, launched in July 2008, will leverage up to $72 billion to provide
additional financing of up to $149 billion in public and private investments
over fiscal 200911.
The largest multilateral investors and lenders in Eastern Europethe
European Bank for Reconstruction and Development, the EIB Group (the
European Investment Bank and the European Investment Fund), and the
World Bank Grouphave pledged to provide up to 24.5 billion to support
banking sectors in the region and to provide credit to businesses hit by the
global economic crisis. Under a two-year plan for 200910, the Bank Groupwill provide a collective 7.5 billion. IFC is expected to contribute up to 2
billion, channeled through its crisis response initiatives in banking,
infrastructure, trade, and other sectors and through its traditional investment
and advisory services. IBRD will increase its lending to European and Central
Asian countries in fiscal 200910 to 16 billion, of which as much as 3.5
billion is envisaged for addressing banking sector issues in emerging Europe.
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The World Bank Group Institutions Summary 2005-
2009
The International Bank for Reconstruction and Development (IBRD)lends to governments of middle-income and creditworthy low-income
countries. This affiliate promotes sustainable development through loans,
guarantees, risk management products, and non-lending analytical and
advisory services. IBRDs financial strength enables it to borrow in capital
markets at low cost and to offer clients favorable borrowing terms.
Established 1944
Members 186
Cumulative lending $ 479 billion
Fiscal 2009 lending $ 32.9 billion for 126 new operations
in 42 countries
IBRD key financial indicatorsMillions of Dollars
2005 2006 2007 2008 2009
Operating
income*
1,320 1,740 1,659 2,271 572
Loans
outstanding
104,401 103,004 97,805 99,050 105,698
Total assets 222,008 212,326 208,030 233,311 275,420
Total equity 38,588 36,474 39,926 41,548 40,037
*Reported in IBRDs financial statements as income before fair value adjustment on non-trading portfolios, net and Board of Governorsapproved transfers.
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The International Development Association (IDA) provides interest-free, long-term loanscalled creditsand grants to governments of theworlds 82 poorest countries, which have little or no capacity to borrow onmarket terms. IDAs lending is financed by contributions to IDA from donor
countries, IBRDs net income transfers, grants from IFC, and IDAs creditreflows.
Established 1960
Members 169
Cumulative commitments $ 207 billion
Fiscal 2009 commitments $14 billion for 176 new operations in
63 countries
IDA KEY FINANCIAL INDICATORSMillions of Dollars
2005 2006 2007 2008 2009
Development
credits
outstanding
120,907 127,028 102,457 113,542 112,894
Total sources
of
development
resources/Tot
al equity*
130,378 102,871 110,212 123,619 127,950
*Up to the fiscal year ended June 30, 2007, IDA prepared special-purpose financial statements. Effective July 1, 2007, IDAs financialstatements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP).
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The International Finance Corporation (IFC) provides long-term loans,equity, structured and securitized products, and advisory and risk mitigationservices to private enterprises in developing and transition countries, helping
reduce poverty and improve peoples lives. IFC seeks to reach businesses inregions and countries with limited access to capital and markets that areconsidered too risky by commercial investors in the absence of IFCparticipation. IFC provides services without accepting governmentguarantees.
Established 1956
Members 182
Committed portfolio $ 34.4 billion plus $ 8 billion
syndicated loans
Fiscal 2009 commitments $10.5 billion committed and $ 4
billion mobilized for 447 projects in
103 countries
IFC KEY FINANCIAL INDICATORS
Millions of Dollars
2005 2006 2007 2008 2009
Operating
income
(loss)*
1,953 1,409 2,739 1,938 (153)
Liquid 13,325 12,730 13,269 14,622 17,864
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assets net
of
associated
derivatives
Loans,
equityinvestment
s, and debt
securities,
net
11,489 12,787 15,796 23,319 22,214
Total
capital
9,821 11,141 14,017 18,261 16,122
*Reported in IFCs financial statements as (loss) income before net gains (losses) on other nontrading financial
instruments accounted for at fair value and grants to IDA.
The Multilateral Investment Guarantee Agency (MIGA) providespolitical risk insurance or guarantees to promote foreign direct investmentinto developing countries. MIGA also works to resolve disputes betweeninvestors and host governments to keep guaranteed investments, and theirbenefits, on track. The agencys knowledge sharing and technical assistanceactivities help countries define and implement strategies to promoteinvestment, and provide information on business opportunities, investmentclimate conditions, and political risk insurance.
Established 1988
Members 174
Cumulative guarantees issued $ 20.9 billion
Fiscal 2009 guarantees issued $1.4 billion for 26 projects
MIGA KEY FINANCIAL INDICATORS
Millions of Dollars
2005 2006 2007 2008 2009
Operating 24 17 49 55 51
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The millennium Development Goals are a challenge the global community
has set for itself. They are a challenge to poor countries to demonstrate good
governance and a commitment to poverty reduction. And they are a
challenge to wealthy countries to make good on their promise to support
economic and social development. The Millennium Development Goals have
captured the worlds attention, in part because they can be measured.
1. Eradicating poverty and hunger
The first of the eight Millennium Development Goals aims to eradicate
extreme poverty and hunger and achieve full and productive employment
and decent work for all. Two of the three targets are illustrated here.
One is to reduce the proportion of people living in extreme poverty to half
the 1990 level by 2015. If this target is achieved by 2015, poverty would not
be eradicated, but it would bring us much closer to the day when we can saythat the entire worlds people have at least the bare minimum to meet their
daily needs. The international poverty line has been recalculated at $1.25 a
day. Using new data on purchasing power parities, compiled by the
international comparison program, and an expanded set of household
surveys, measured at the $1.25 a day line, extreme poverty has been
decreasing since the 1980s. The greatest reduction occurred in East Asia and
the Pacific, where poverty rates declined from 55 percent in 1990 to 17
percent in 2005. Only this region is consistently on track to meet the MDG
target of reducing 1990 poverty rates by half by 2015. But a slight
acceleration over historical growth rates could lift Latin America and the
Caribbean and south Asia to the target. Whether poverty rates will continue
to fall in all regions may depend on the length and depth of the recent
recession that was triggered by the global financial crisis.
2. Achieving universal primary education
Education prepares children to participate in their society and in the global
economy. It is the basis for reducing poverty and inequality, improving
health, enabling the use of new technologies, and creating and spreading
knowledge.
Since 1990 the countries of the world have called for all children to be able
to complete primary school, but more than 75 million children of primary
school age remain out of school, most of them in South Asia and Sub-
Saharan Africa, and the majority of them are girls. To reach the Millennium
Development Goals by 2015, school systems with low completion rates will
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need to start now to train teachers, build classrooms, and improve the
quality of education. They will also have to remove barriers to attendance,
such as fees and lack of transportation, and address parents concern for the
safety of their children.
3. Promoting gender equality
Gender inequality starts early and keeps women at a disadvantage
throughout their lives. In some countries, infant girls are less likely to survive
than infant boys because of parental discrimination and neglect. Girls are
more likely to drop out of school and to receive less education than boys
because the economic value of their work at home exceeds the perceived
value of schooling, but when a country educates both its boys and its girls,
economic productivity tends to rise, maternal and infant mortality ratesusually fall, fertility rates decline and the health and education prospects of
the next generation improve.
Three regions lag behind in providing girls full access to primary and
secondary school: South Asia, Sub-Saharan Africa, and the Middle East and
North Africa. But countries with the widest gender gaps have made progress
and renewed efforts to get all children into school will create more
opportunities for girls. That is not all that is needed. Empowering women
means having an equal voice in all decisions which affect their lives: in the
family, in the marketplace, and in government.
4. Reducing child mortality
Every year almost 11 million children in developing countries die before the
age of five, most from causes that are readily preventable in rich countries:
acute respiratory infections, diarrhea, measles, and malaria. Rapid
improvements before 1990 gave hope that mortality rates for infants and
children under five could be cut by two-thirds in the following 25 years.
Progress slowed almost everywhere in the 1990s. Only two regions-LatinAmerica and Caribbean, and Eastern Europe and Central Asia may be on
track to achieve the target, progress has been particularly slow in Sub-
Saharan Africa, where civil disturbances and the HIV epidemic have driven
up rates of infant and child deaths.
5. Improving maternal health
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Complications from pregnancy and childbirth are a leading cause of death
and disability among women of reproductive age in developing countries.
Every year more than 500,000 women die during pregnancy or childbirth,
and at least 10 million women suffer injuries, infection, and disabilities.
Death in childbirth is a rate rare event in rich countries, where there aretypically fewer than 15 maternal deaths or every 100,000 live births. But in
the poorest countries of Africa and Asia the rate may be 100 times higher.
And because women in poor countries have more children, their lifetime risk
of maternal death may by more than 200 times greater than that for women
in rich countries, there is some evidence of progress. More women have
access to reproductive health services, and in many places births are more
likely to be attended by trained health staff.
6. Combating disease
Epidemic diseases exact a huge toll in human suffering and lost
opportunities for development. Poverty, armed conflict, and natural disasters
contribute to the spread of disease and are made worse by it. HIV,
tuberculosis, and malaria are among the worlds biggest killers. Effective
prevention and treatment programs will save lives. Reduce poverty and help
economies develop.
In Africa the spread of HIV has reversed decades of improvements in life
expectancy and left millions of children orphaned. It is draining the supply of
teachers and eroding the quality of education.
There are 300-500 million cases of malaria each year, leading to more than 1
million deaths. Most cases occur in Sub-Saharan Africa and most deaths from
malaria are among children younger than five years old.
Tuberculosis kills some 2 million people a year, most of them 15-45 years
old. The disease is spreading more rapidly because of the emergence of
drug-resistant strains of tuberculosis; the spread of HIV, which reduces
resistance; and the growing number of refugees and displaced people.
7. Ensuring environmental sustainability
Sustainable development can be ensured only by protecting the environment
and using its resources wisely. Poor people, often dependent on natural
resources for their livelihood, are the most affected by environmental
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degradation and natural disasters, the effects of which are worsened by
environmental mismanagement.
Although many countries have adopted principles of sustainable
development and agreed to international accords on protecting the
environment, land is still being degraded. Forests are being lost and fisheriesoverused, plant and animal species are becoming extinct, and carbon
emissions are leading to climate change.
8. Developing a global partnership
Goal 8 calls for an open, rule-based trading and financial system, more
generous aid to countries committed to poverty reduction, and relief for the
debt problems of developing countries. It draws attention to the problems of
the least developed countries and of landlocked countries and small-island
developing states, which have greater difficulty competing in the globaleconomy. It also calls for cooperation with the private sector to address
youth unemployment, ensure access to affordable, essential drugs, and
make available the benefits of new information and communication
technologies.
Economies need to grow to provide jobs and incomes for poor people. Health
and education systems must deliver services to everyone: men and women,
rich and poor. Infrastructure has to work and be accessible to all. And
policies need to empower people to participate in the development process.
While success depends on the actions of developing countries, which mustdirect their own development, there is also much that rich countries must do
to help. This is what Goal 8 is for it complements the first seven. Official
development assistance to developing countries reached $ 105.1 billion in
2007.
SPURRING TRADE AND DEVELOPING THE FINANCIALAND PRIVATE SECTORS
Trade
The Bank launched the Trade Facilitation Facility, a rapid-response fund
aimed at helping developing countries reduce trade costs and enhance their
ability to move goods and services across borders rapidly, cheaply, and
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predictably. The facility is designed to finance activities that will make
immediate and direct improvements in trade facilitation systems by
modernizing infrastructure, institutions, policies, and regulations. Reducing
trade costs represents a significant opportunity for countries to realize their
economic development and poverty-reduction goals during this time of
economic crisis. Surveys of exporters, importers, and local banks involved
with trade finance in 14 developing countries reveal that the cost of trade
finance has increased markedly and the supply of export finance has
contracted. The World Bank has put in place operational programs with a
trade finance component in the amount of $4 billion through the IFC Global
Trade Finance Program (GTFP) and the Global Trade Liquidity Program
(GTLP). Together with its official and private partners, the GTLP is expected
to contribute up to $50 billion in short-term trade finance over a three-year
period.
Financial and Private Sector Development
The Banks fiscal 2009 work on financial and private sector development
focused on assisting governments in managing their responses to the
financial crisis; maintaining financial stability; ensuring access to finance,
especially by micro-, small-, and medium-size enterprises and the poor; and
creating conditions for economic recovery and growth. It did so through
three main mechanisms: crisis preparedness, financial sector reforms, and
investment climate reforms.
Crisis Preparedness and Tracking The Bank supported nationalauthorities in undertaking simulation exercises in fiscal 2009 to replicate the
key characteristics and behaviors of a financial system in crisis. The process
was designed to prepare authorities to better manage potential crises and
increase the speed of their responses. In addition, CGAP (Consultative Group
to Assist the Poor) offered a suite of analytical products that tracked what
was happening to microfinance performance globally. And as part of a
campaign for responsible finance, CGAP helped investors implement the
Client Protection Principles.
Financial Sector Reforms The Bank advised a number ofgovernments on the design of regulatory reforms during fiscal 2009. The
Financial Sector Assessment Programs (FSAPs), carried out with the IMF in
low and middle-income countries, will continue to play a critical role as a key
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diagnostic in understanding the vulnerabilities and developmental challenges
of financial systems. The Bank has engaged in FSAPs and FSAP updates in
more than 120 countries over the past 10 years, contributing to the
analytical underpinnings of financial sector reforms and some of the recent
crisis-related loans to governments. In more than 50 countries, the Bank is
helping to enhance the stability of and promote access to basic payment
services. Jointly with IFC, the Bank is promoting credit bureau development
in more than 50 countries, and has helped establish or improve 13 bureaus
supporting approximately $19 billion in financing and working on secured
transaction and collateral registry projects in nine countries. Such a project
in China, completed in June 2009, supported more than $350 billion in
receivables financing. The Banks Remittance Prices worldwide Database
contains detailed information on the cost of sending remittances in 134
bilateral corridors. These data are intended to increase transparency in the
market for remittances, which combined with adequate consumer protection,help foster a competitive and safe market for remittances, and are an
important factor in the reduction of costs.
Investment Climate ReformsThe Bank supports governments indeveloping countries in reforms to improve the environment for business,
with the objective of promoting a robust and competitive private sector. One
focus of this work is improving the efficiency of business regulation, leading
to more opportunities for entrepreneurship and formal sector employment.
The annual BankIFC publication Doing Business has tracked close to 1,000
such reforms in 158 countries over the past five years. Business startup
reforms in Mexico, for example, boosted formal sector employment by close
to 3 percent. A new initiative launched this year, the online Gender Law
Library, tracks laws and regulations that affect the economic status of
women in 181 economies. The database facilitates comparative analysis of
legislation, contributing to reforms that can enhance womens full economic
participation. The multi-donor Foreign Investment Advisory Service (FIAS),
focused on supporting measurable reforms to improve the investment
climate in about 40 countries in fiscal 2009, expanding activities in strategic
priority areas such as Africa, IDA countries, and conflict-affected states. Inresponse to the global financial crisis, it scaled up its work in business
reform, secured lending and collateral frameworks, business tax
simplification, and trade logistics. FIAS also began developing a new
insolvency product to assist countries in improving their legal and
institutional frameworks for insolvency and corporate restructuring.
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World Bank: Action in the field
AFRICA
New Commitments Disbursements
IBRD $362 million IBRD $120 million
IDA $7,887 million IDA $4,317 million
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EAST ASIA AND PACIFIC
New Commitments Disbursements
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IBRD $6,905 million IBRD $3,275 million
IDA $1,247 million IDA $1,254 million
EAST ASIA AND PACIFIC
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South Asia
New Commitments Disbursements
IBRD $1,286 million IBRD $1,202 million
IDA $4,148 million IDA $2,792 million
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EUROPE AND CENTRAL ASIA
New Commitments Disbursements
IBRD $8,978 million IBRD $4,887 million
IDA $384 million IDA $493 million
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LATIN AMERICA AND THE CARIBBEAN
New Commitments Disbursements
IBRD $13,829 million IBRD $7,864 million
IDA $202 million IDA $180 million
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MIDDLE EAST AND NORTH AFRICA45
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New Commitments Disbursements
IBRD $1,551 million IBRD $1,216 million
IDA $172 million IDA $183 million
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The World Bank is a development institution whose goal is to reduce poverty
by promoting sustainable economic growth in its client countries.
Development is a long-term process which ultimately involves the48
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transformation of whole societies. It is about getting economic and financial
policies right. But it is also about empowering the people, building the roads,
writing the laws, recognizing the women, educating the girls, eliminating the
corruption, protecting the environment, inoculating the children - and much,
much more. Development is about putting all the component parts in place -
balanced economic andsocial programs.
The challenge is immense, and this means that everyone involved in the
development process - governments, institutions such as the Bank, civil
society, and the private sector - must work in close partnership to define the
needs and implement the programs.
The global fight against poverty is aimed at ensuring that people everywhere
in this world have a chance for a better life for themselves and for their
children. Over the past generation, more progress has been made in
reducing poverty and raising living standards than during any other period inhistory. In developing countries:
Life expectancy has increased from 55 to 65years
Incomes per person have doubled
The proportion of children attending school has risen from less
than half to more than three quarters
Infant mortality has been reduced by 50 percent
Despite these successes, massive development challenges remain. Of the
4.7 billion people who live in the 100 countries that are World Bank clients:
3 billion live on less than $2 a day and 1.3 billion on less than $1
a day
40,000 die of preventable diseases every day
130 million never have an opportunity to go to school
1.3 billion do not have clean water to drink
All countries have a stake in meeting these challenges. Raising living
standards and promoting growth and development in the world's poorer
countries also expands trade, jobs, and incomes in the wealthier countries.
Equally, an increase in poverty in developing countries can adversely affectwealthier nations as markets and investment opportunities shrink, the
environment is damaged, and people migrate in search of work and income.
We live in one world - a world linked by communications and trade, by global
finance and a shared environment, and most of all by common aspirations
for a better life. The fight against global poverty is - without question - a
global responsibility.
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The World Bank is the world's largest source of development assistance,
providing nearly $30 billion in loans annually to its client countries. The Bank
uses its financial resources, its highly trained staff, and its extensive
knowledge base to individually help each developing country onto a path ofstable, sustainable, and equitable growth. The main focus is on helping the
poorest people and the poorest countries, but for all its clients the Bank
emphasizes the need for:
*0 Investing in people, particularly through basic health and education
*1 Protecting the environment
*2 Supporting and encouraging private business development
*3 Strengthening the ability of the governments to deliver quality
services, efficiently and transparently
*4 Promoting reforms to create a stable macroeconomic environment,conducive to investment and long-term planning
*5 Focusing on social development, inclusion, governance, and institution-
building as key elements of poverty reduction
The Bank in the 21st Century
As the world enters the 21st century, there is room for neither gloom nor
complacency. For the countries emerging from financial crisis, the worst
appears over; prospects are brighter, to different degrees. Success for thedeveloping world will depend in part on economic developments in the
United States, Europe and Japan. Equally important is whether developing
countries are able to put in place the policies and structural reforms which
can provide the basis for strong growth. Worldwide, those countries will
prosper which are best able to capitalize on the opportunities of globalization
while effectively managing its risks. Those which do not adapt will fall farther
and farther behind - creating wider gaps, globally, between the haves and
have-nots.
Mindful of the challenges ahead, the Bank is working with developing
countries to pilot a more inclusive and more integrated approach to its
development mission - the Comprehensive Development Framework (CDF).
As the Bank has moved beyond simply financing projects - and even beyond
supporting only discrete policy reforms, such as trade liberalization - to
addressing broader issues such as human and social development,
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governance, and institutions, the need for an integrating framework of this
kind became apparent. The CDF approach calls for a development plan
"owned" by the country itself, focused on a long-term vision of the results to
be achieved, and supported by strong partnerships among governments,
donors, civil society, the private sector and other development actors.
In launching the CDF, the Bank has focused attention on what it sees as the
essential building blocks for effective development:
*0 Structural: good governance and clean government, an effective legal
and judicial system, a well-organized and supervised financial system,
and social safety net and social programs.
*1 Physical: water and sewerage, energy, roads, transport and
telecommunications, and environmental and cultural issues.
*2 Specific strategies: for rural, urban, and private sector development
Additionally, each country has its own unique priorities. Attention tomacroeconomic and fiscal issues, trade and regulatory issues, the labor
market and employment conditions, and the role of the private sector, for
example, depends on the characteristics of the country and the results of the
national dialogue about priorities and programs needed to address them.
The CDF is essentially a process. It is a new way of doing business, a tool to
achieve greater development effectiveness in a world challenged by poverty.
In the short run, the CDF establishes mechanisms to bring people together
and build consensus; it forges stronger partnerships that allow for strategic
selectivity, and emphasizes the achievement of concrete results. In the long
run, the expectation is that the CDF will enhance development effectiveness
and contribute towards the central goal of poverty reduction.
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Programs of the World Bank
Through its loans, policy advice and technical assistance, the World Bank
supports a broad range of programs aimed at reducing poverty and
improving living standards in the developing world. Effective povertyreduction strategies and poverty-focused lending are central to achieving
these objectives. Bank programs give high priority to sustainable, social and
human development and strengthened economic management, with a
growing emphasis on inclusion, governance and institution-building.
Investing in People
No country will grow economically and reduce poverty while its people
cannot read or write, or while its people struggle with malnourishment and
sickness. As we enter the new millennium, hundreds of millions of peoplelack the minimally acceptable levels of education, health, and nutrition that
so many in the industrialized world take for granted. This is not just a moral
issue, it is a global economic travesty and a major impediment to the
reduction of poverty.
Accordingly, the Bank targets much of its assistance where the impact is
greatest - on basic social services such as reproductive and maternal health
care, nutrition, early childhood development programs, primary education,
and programs that target the rural poor and women. As the single largest
investor in social sectors, the Bank has provided loans totaling over $40billion for more than 500 projects for human development in 100 countries.
Protecting the Environment
Poverty reduction is intrinsically linked to environmental and social
sustainability. Sustainability means a number of things, but first and
foremost it means that resources, including human resources, are enhanced
or protected rather than damaged or depleted as part of the development
process. Developing countries are, in most instances, much more vulnerable
to environmental degradation than industrial countries. Problems such as airand water pollution, climate change, loss of biological diversity,
desertification, and deforestation are threatening their ability to meet the
basic human needs of their people: adequate food, clean water, safe shelter,
and a healthy environment.
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The Bank goes to great lengths to ensure that its projects do not harm the
natural environment. All projects are screened to determine whether they
pose environmental risks. Environmental assessments are undertaken on
projects that may be harmful and the Bank includes special measures in
such projects to avoid environmental damage. Environmental concerns have
been mainstreamed into all Bank activities, because experience has shown
that it is more cost effective to prevent environmental damage than to clean
it up later.
Stimulating Private Sector Growth
The private sector is the engine of long-term growth. A stable and open
business climate with access to credit and sound financial systems is
essential for private entrepreneurs to emerge, for business to flourish, and
for local people and investors from abroad to find the confidence to invest,
and create wealth, income, and jobs. The World Bank is helping client
governments throughout the developing world create the necessary
conditions for the revival and expansion of private sector investment. These
include:
Putting in place the basic laws, regulations, and local institutionsthat private investors need to ensure clear enforcement of contractualobligations
Building the physical infrastructure (such as transportation,water, energy, telecommunications, etc.) and developing the critical
technological and information base necessary for countries to competein the global marketplace
Developing local capital markets and banking systems.In addition to its loans and technical assistance, the World Bank also offers
guarantees to encourage private investment; these guarantees are designed
to mitigate investment risks, especially for long-term debt financing. They
are particularly important for encouraging private financing of infrastructure
- where more than $250 billion a year in investment is needed to meet World
Bank client country needs for the next decade. These guarantees are
intended to supplement reform programs and complement the risk
mitigation benefits offered to the private sector by IFC and MIGA.
Since its inception, the Bank's private sector affiliate, the International
Finance Corporation (IFC), has supported some 2,000 companies in 129
countries through more than $21 billion in financing from its own account
and $15 billion arranged through syndications and underwriting. The IFC also
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helps countries establish capital markets and provides advisory services for
privatization of state-owned enterprises.
Promoting Economic Reform
As economic distortions exacerbate poverty, the Bank helps its clientgovernments improve their economic and social policies so as to increase
efficiency and transparency, promote stability, and bring about equitable
economic growth. The Bank provides funding, policy advice and technical
assistance in support of reform efforts to cut budget deficits, reduce
inflation, liberalize trade and investment, privatize state-owned enterprises,
establish sound financial systems, strengthen judicial systems, and ensure
property rights. These reforms help attract foreign private capital, generate
domestic savings and investment, and enable governments to provide
effective social services.
However, because reform measures can lead to unemployment as
unproductive enterprises are closed, and to increased prices when inefficient
government subsidies are cut, reforms can adversely affect poor and
vulnerable people in the short term. To address these concerns, Bank
support for reform often includes funding for safety net programs to help
protect the poor or to keep vulnerable people from slipping into poverty.
Fighting Corruption
For governments to be effective, they must have the trust and confidence ofthe people they serve. Corruption has a devastating economic and social
impact. It undermines trust in government and diminishes the effectiveness
of public policy. It impedes investor confidence and has a negative impact on
foreign investment. Corruption also reduces the effectiveness of aid and
threatens both political and grassroots support for donor assistance.
While citizens and governments must themselves lead the fight against
corruption, the Bank has been assisting a number of countries with their anti-
corruption efforts. The Bank has conducted surveys to diagnose the extent
and character of corruption in a given country. It has also organizedworkshops, courses and training for government officials and members of
civil society. But most far-reaching, perhaps, are the efforts the Bank is
making to help countries identify and implement the policy and institutional
reforms which can minimize opportunities for corruption; these reforms
include better financial regulation, supervision and disclosure; greater
transparency in public sector decision-making; and greater accountability in
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the private sector through the confirmation of shareholder and creditor
rights.
Assisting Countries Affected by Conflict
Conflict and violence are among the world's most pressing developmentproblems, affecting many of the world's poorest countries. The Bank's
comparative advantage in this area lies in facilitating the transition from
dependence on relief to sustainable economic growth, and improving the
coordination of post-conflict reconstruction and recovery assistance. The
Bank's post-conflict assistance has focused not only on rebuilding
infrastructure, but also on programs to promote economic adjustment and
recovery, address social sector needs, and build institutional capacity.
Projects are also being designed to assist in demining, demobilization and
reintegration of ex-soldiers, and reintegration of displaced populations. The
Bank is working around the globe - in places as diverse as the Balkans,
Burundi, Cambodia, Sierra Leone, and Haiti - and with a wide range of
partners to held rebuild economies and bring stability and a better future to
the people whose lives have been affected by conflict.
Leveraging Investment
The World Bank's unique partnership with its client governments, and its role
in helping them shape their plans and priorities, equip it to play a strongcoordinating role in leveraging funds for development.
IBRD and IDA loans and credits typically cover less than half of the total
investment costs of a project. The remainder is provided by client
governments themselves or by co-financiers. In this fashion, the resources
that the Bank raises from bondholders and shareholders are multiplied in
both scope and effectiveness.
The World Bank provides over $24 billion in assistance to developing and
transition countries every year. The Bank's projects and policies affect thelives and livelihoods of billions of people worldwide - sometimes for the
better, but very often in controversial and problematic ways.
Why World Bank Programs Fail
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The main reason for a lack of economic growth in these countries is a
corresponding lack of economic freedom. A lack of economic freedom
prevents countries from creating wealth and prosperity, and a recent
worldwide survey of economic freedom finds that many World Bank
recipients have economies that are mostly not free or repressed. The 1996
Index of Economic Freedom, published by The Heritage Foundation, analyzes
the level of economic freedom in 142 countries.18 The study considers ten
economic factors -- trade, taxation, government consumption, monetary
policy, banking, foreign investment, wage and price controls, private
property rights, regulation, and black markets -- and categorizes each
country as having a "free," "mostly free," "mostly not free," or "repressed"
economy. The findings of the study demonstrate that a majority of World
Bank loan and grant recipients do not have significant levels of economic
freedom:
Of the 60 long-term recipients of World Bank aid that were graded in
The 1996 Index of Economic Freedom, 37 have economies that are
"mostly not free" or "repressed"
Only 23 long-term recipients of World Bank aid have economies that
are "mostly free," and none have economies that are "free"
Thus, most long-term recipients of World Bank loans and grants still do not
have significant levels of economic freedom. Moreover, those recipients that
have performed particularly poorly are the least economically free:
The 18 countries whose economies have shrunk since they have been
World Bank recipients, 16 have either "mostly not free" or "repressed"
economies.
Economic prosperity is not forthcoming in these countries because they do
not have economic freedom. Rather, most have high taxes, barriers to trade,
restrictions on foreign investment, banking systems in disarray, onerous
government regulations, bad monetary policies, extensive wage and price
controls, and large black markets. To be sure, 23 long-term recipients of
World Bank aid do have mostly free economies, but most of these are in
Latin America, an area which has benefited from several years of economic
reform. Thus, their categorization as having mostly free economies is a
recent phenomenon.19 It is good that they are making progress, but given
the evidence elsewhere in the world, it would be difficult to attribute this
progress to help from the World Bank.
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Development without World Bank
Hong Kong and Singapore: Models of Growth
without World Bank Aid
The poor record of the World Bank in delivering on its promise of economic
development can be demonstrated not only by listing its many failures, but
also by examining some development successes that occurred without the
Bank's help. Hong Kong and Singapore are the most successful of the so-
called Asian Tigers, running up phenomenal economic growth rates that are
the envy of the developed world. They did this largely without loans from the
World Bank. Even though they were as poor 30 years ago as other countries
that took World Bank aid, they eschewed World Bank loans and embarked
instead on successful programs of economic liberalization. The evidenceshows that there is a direct correlation between the economic freedom these
countries enjoy and their tremendous economic growth over the past 30
years. Of one thing there can be absolutely no doubt: World Bank assistance
was in no way responsible for creating the best development success stories
the world has seen during this 30-year period.
Hong Kong
In the 1960s, the U.S. foreign aid community and international lending
institutions like the World Bank decided that the East Asian region was
barren of economic promise and that they should focus their aid on Africa
instead. Hong Kong received no aid from the World Bank and only a small
amount in U.S. foreign aid -- $43 million, most of which was cut off after
1965. The World Bank admitted that many economists misjudged the
economic prospect in Asia. In the commemorative volume marking the
Bank's 50th anniversary, the authors state: "In the 1960s, many economists
were more optimistic about sub-Saharan Africa than East Asia. Yet, East Asia
proved to be the 'miracle' of the developing world -- and sub-Saharan Africa
its most daunting challenge.
While eschewing foreign aid after 1965, Hong Kong at the same time began
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sectors, including banking and financial services, government regulation of
business, and foreign investment laws. Among the most important of these
reforms was lowering barriers to international trade and making Hong Kong's
trade laws consistent with international standards. The government
eliminated virt