REGIONAL STRATEGY 2012

Europe and Central Asia (ECA)

1R E G I O N A L U P D A T E

Supporting our clients to build the foundations of long-term growth and competitiveness

I. Strategic Framework The three strategic pillars (competitiveness, inclusion, climate action) remain highly relevant

with renewed emphasis on governance

II. Operational ResponseLending expected to be higher than pre-2009 owing to higher demand, complemented by

improved disbursements and a strong Analytical and Advisory Assistance (AAA) program

2R E G I O N A L U P D A T E

2

OUTLINE OF THE PRESENTATION

3R E G I O N A L U P D A T E

3

I. STRATEGIC FRAMEWORK

Create Opportunities

for Growth

Target the Poor and Vulnerable

Strengthen Governance

Promote Global Collective

Action

Manage Risk and Prepare for

Crises

Deepened Reforms for Improved

Competitiveness

Social Sector Reforms for Inclusive Growth

Climate Action for Sustainable Growth

World Bank Group (WBG) Priorities

Addressing ECA Challenges

ECA Strategic Pillars

Drivers of pre-crisis growth (capital flows

and strong export growth) are unlikely to

return quickly

Social inclusion and equity issues will be

tougher to address in a period of fiscal consolidation

Need to improve energy efficiency and reduce

vulnerability to climate change will remain

medium-term priorities

I. STRATEGIC FRAMEWORK ECA REGIONAL STRATEGY IS ALIGNED WITH WORLD BANK GROUP PRIORITIES

4

5

Scale up and Diversify Financial Products

Customize Knowledge

Services

Develop Closer Regional

Partnerships

Sub-Regional Approaches

• ECA Strategy – 3 pillars and 4 instruments – remains highly relevant to support the region in addressing short-term and long-term challenges

• Past engagement has made the Bank better prepared to step up financial and analytical support in response to spillover from eurozone crisis:

• Better starting position owing to renewed and deeper policy engagement in most vulnerable countries

• On-going and planned technical assistance, including crisis monitoring

• Flexibility to top up Development Policy Loans (DPLs) and credit lines

• Closer engagement with EC, IMF and other partners on crisis-response

I. STRATEGIC FRAMEWORK ECA STRATEGY REMAINS HIGHLY RELEVANT

with renewed emphasis on governance

Focus on Competitiveness,

Inclusion and Climate Change

with renewed emphasis on governance

66

Governance

I. STRATEGIC FRAMEWORK - IMPROVED GOVERNANCE IS AN IMPORTANT CROSS-CUTTING THEME SUPPORTING THE THREE PILLARS

•Sound macro-fiscal and public financial management•Good governance for improved business climate and innovation•Stable and well-regulated financial intermediation•Cost-effective investments in energy and transport infrastructure•Education and training systems more accountable for relevant skills

• Increasing employment and reforming labor markets•Ensuring access to quality public services in health and education•Modernizing safety nets through better coverage of the poor and stronger monitoring and control •Closing gender gaps in access to economic opportunities •Helping countries meet remaining MDGs (health MDGs most at risk)

Social Sector Reforms for

Inclusive Growth

Deepened Reforms for Improved

Competitiveness

Climate Action for

Sustainable Growth

• Economically sound adaptation investments• Incentives for energy efficiency• Investments in renewable energy

Bilateral Donors

I. STRATEGIC FRAMEWORKGROWING REGIONAL PARTNERSHIP ESPECIALLY WITH THE EU AND RUSSIA

European Uniono Closer partnership with the EU since the 2009 crisiso EC/EMPLOY– Programmatic Trust Fund for Bank Advisory Services on

EU2020, starting in FY12 with poverty mapping in EU-10o EC/IPA Trust Fund for Research and Innovation in the Western Balkans o Memorandum of Understanding (MoU) signed with EIB and EBRD for

Programmatic Fee-based Services (FBS) in Romania and Bulgaria

International Financial Institutions (IFIs)

o New Vienna Initiative with EC, EBA, EBRD and EIBo Full associate membership of Western Balkans

Investment Framework with EIB and EBRDo Growing Cooperation with CEBo Memorandum of Understanding (MoU) with Eurasian

Development Bank and EurAsEc Anti-Crisis fundo Ongoing cooperation with ADB

Multilateral Donors

Emerging Donor - Russia

o Close partnership with Russia as an emerging donor o Russian Multi-Donor Trust Fund for Public Expenditure Management and Peer-

Assisted Learning (PEMPAL) in ECAo Russian Trust Fund for Policy and Project Capacity Development in ECAo Russian Statistical Capacity Building Fund

Traditional Donors

o Traditional donors are exiting ECA but contribute to Multi-Donor Trust Funds (MDTFs)

o Austria, Netherlands, Sweden, Switzerland, USAID, UK DFID

FY08 FY09 FY10 FY11 FY12 (proj) FY 13 (proj) - 1 7

18 4

43

2

25 21

25 37

49

Russian Federation EC/EU

EU and Russian contributions to ECA Trust Funds by Fiscal Year

$ m

illio

n

7

Central Asia: Management of Energy

and Water

• Development of Central Asia Energy and Water Program; Continued country level dialogue

Vienna Center• Helping to improve

the business environment through improvements in corporate reporting (REPARIS)

• New banking and financial sector initiative

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South Eastern Europe

• Supporting regional dialogue and solutions in Energy, Transport, Water Management, and Disaster Management

• South Eastern Europe Gas Ring

Central and South Eastern Europe

• Analytical work on Roma inclusion; Support for Roma Education Fund and “Decade of Roma Inclusion”; Working closely with the EC, including on monitoring EC funded programs that benefit Roma through FBS

• Danube Region Water and Wastewater program

• Vienna Initiative II building on Vienna Initiative 2009

Caspian to Black Sea Transit Corridor

• Coordinating donor and government road investments

• Regional power trade

I. STRATEGIC FRAMEWORK ..AND A CONSISTENT USE OF SUB-REGIONAL APPROACHES

CIS – Migration and Remittance Peer

Assisted Learning Network

• MIRPAL - Community of Practice on management of labor migration and remittances

9R E G I O N A L U P D A T E

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II. OPERATIONAL RESPONSE

II. OPERATIONAL RESPONSESTRONG DEMAND FOR FINANCIAL SERVICES

New Commitments by Instrument

New IDA/IBRD Commitments

Innovative Use of Instruments

o Policy Based Guarantees in Serbia and Macedonia that leverage lending headroom to support macro stability and fiscal consolidation

o Results Based Lending in Romania for Social Assistance Reform

Projected lending FY12-13 in high case = $15.8 b

$ Bi

llion

$ Bi

llion

FY08 FY09 FY10 FY11 FY12E FY13E0

2

4

6

8

10

12

3.44.5

2.8 3.0 3.34.7

0.8

4.9 8.0

3.14.1

3.7

4.2

9.4

10.8

6.1

7.48.4

DPL IL

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12E FY13E0.0

2.0

4.0

6.0

8.0

10.0

12.0

2.13.0 3.5 3.5 3.3 3.7

9.010.2

5.56.9

7.8

0.60.5

0.5 0.5 0.40.5

0.4

0.6

0.7

0.5

0.6

2.73.5

4.0 4.0 3.74.2

9.4

10.8

6.1

7.48.4

IDA IBRD Series3

10

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II. OPERATIONAL RESPONSELENDING IS FOCUSED ON SUPPORTING COMPETITIVENESS

Lending Shares by Country Management Units (CMUs)

Lending by Strategic Pillar

Innovative Operations o Russia - Financial Education and Financial

Literacyo Latvia - Special DPL on Safety Net and Social

Sector reformo Turkey – Environmental Sustainability DPL

and Renewable Energy and Energy Efficiency loan

o Ukraine - Energy Efficiency Credit Line

2.0

7.3

6.3

9.8

42.3

22.4

10.04.8

17.6

32.36.93.2

28.8

6.4 Russia

Moldova, Belarus, Ukraine

Armenia, Azerbaijan, Georgia

Western Balkans

EU-10 and Croatia

Turkey

Central Asia

FY08 FY11co

mpe

titive

ness

FY09 FY10 FY110

2000

4000

6000

8000

10000

12000

9362.8

10816.2

6124.3

Climate Ac-tion

Social Inclu-sionOther

Skills

Infra-structure

PEM/PFM

Banking/Finance

Business Climate and Innovation

Perc

ent

Perc

ent

AAA Shares by CMU, FY 11

12

Analytical & Advisory Assistance (AAA) Expenditures as a Share of All Funds • Regional Flagships on

• Growth (Golden Growth)• Innovation• Energy Efficiency (Lights Out?)

• Regular economic reports (EU-10, Western Balkans, Russia)• Sub-regional study on Benefits of Roma Inclusion• Poland – “Green” Country Economic

Memorandum (Transition to a Low Carbon Economy) • Russia – PPP – St. Petersburg Airport• Romania – Functional reviews

Selected High Impact AAA

AAA by Knowledge Product

AFR EAP ECA LCR MNA SAR0

5

10

15

20

25

30

18

24 23

17

26

1617

23

29

17

25

19

FY09 FY12

Per

cen

t o

f to

tal

exp

end

itu

res

14

12

8

1216

9

29

Russia

Moldova, Belarus Ukraine

Armenia, Azerbaijan, Georgia

Western Balkans

EU-10 and Croatia

Turkey

Central Asia

II. OPERATIONAL RESPONSE - KNOWLEDGE IS A STRENGTH OF THE REGION, GROWING DEMAND FOR TECHNICAL ASSISTANCE SERVICES

Perc

ent

FY07 FY08 FY09 FY10 FY110

50

100

150

200

250

91 100 98121 133

108 90 76

81 58

ESW TA

Num

bers

III. OPERATIONAL RESPONSE - ECA IS BOTH A CONTRIBUTOR TO AND A USER OF GLOBAL KNOWLEDGE ON DEVELOPMENT

13

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Fragile and poorCountry level: • Support for demand-side governance and

budget transparency (Kyrgyz, Tajikistan)Sector level: • Institutional reforms to improve governance in

agriculture (Tajikistan)• TA to improve transparency and predictability

of social spending (Uzbekistan)Project level:• Governance checklist applied to every project at

mid-term review (Tajikistan)

Russia and other resource rich countries

Sector level:• Advisory work on sovereign wealth fund

management (Kazakhstan) • Diagnostics on regional business climate (Russia) • Procurement reform (Russia)

Ukraine and the South Caucuses

Country level:• Governance a

central theme of Country Assistance Strategies (CAS) (Ukraine)

• AAA – Governance reforms case study (Georgia)

Sector Level:• DPLs which support

fiscal transparency and regulatory reform (Armenia, Georgia)

Project level:• Transport portfolio

fiduciary review (Georgia)

EU and Western BalkansCountry level : • Governance focused AAA to improve

government effectiveness (Romania functional reviews)

Sector Level:• Financial sector stress tests and capacity

building (Latvia) • Technical Assistance (TA) to improve

transparency and predictability of social spending (Latvia, Romania)

• Justice sector AAA (Croatia) Project level :• Civil society monitoring of Bank financed

projects (Albania)

III. OPERATIONAL RESPONSE..AND SUPPORT FOR GOVERNANCE REFORMS HAS BEEN SCALED UP..

Region• Governance and Anti-Corruption (GAC)

outcomes tracked through indicators such as BEEPS, Doing Business, Life in Transition Surveys, etc.

• Governance filters in CGAC countries (Albania, Tajikistan)

Governance Ratings have shown improvement

1999 2001 2003 2005 2007 2009 20102.5

2.7

2.9

3.1

3.3

3.5

3.7

3.9ECA AFREAP LACMENA SAR

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II. OPERATIONAL RESPONSE….ACHIEVING RESULTS ON THE GROUND

MORE COUNTRY RESULTS http://www.worldbank.org/eca/countrysnapshots

EU Members

Policy reforms: • Fiscal: Budget consolidation (Romania)•Financial: Strengthened banking system resilience (Latvia, Romania)•Social: Strengthened social safety nets (Romania, Latvia)

Other results:• Bulgaria: 300km of

roads repaired and functioning; Roads Asset Management System established

Russia and otherresource rich

Policy reforms: • Fiscal: Strengthened oil

fund management (Kazakhstan)

• Financial: Strengthened banking system resilience (Kazakhstan)

Other results:• Russia: PFM reform with

three-year budget framework; more efficient tax administration; treasury single account

• Russia: Improved public service delivery through one-stop-shops, waiting times cut by 65%

• Azerbaijan: Center for Accounting and Audit Training established

IDA/Blend

Policy reforms: • Fiscal: Improved fiscal

management and protection of social expenditures (Armenia, Georgia)

• Social: Strengthened social safety nets (Armenia)

Other results:• Armenia: Improved water

delivery and quality, and customer service: 332,000 households in the capital have running water 21 hours a day, up from 6.

• Moldova: Number of days required to register a new company decreased by 31% from 20 days (2005) to 14 (2010)

Other MICs

Policy reforms:• Fiscal: Budget

consolidation (Serbia, Croatia)

• Financial: Strengthened banking system resilience (Turkey)

• Social: Strengthened safety nets (Albania)

Other results:• Bosnia and

Herzegovina: 37 land registry offices renovated and equipped; over 1.6 million property folios digitized

Fragile (Kyrgyzstan)Policy reforms: • Fiscal: Improved fiscal management and protection of social expenditures•Financial: Strengthened banking system resilience •Social: Strengthened social safety nets

Other results:1,500 villages with access to improved social and economic infrastructure

I. Strategic Framework The three strategic pillars (competitiveness, inclusion, climate action) remain highly relevant

with renewed emphasis on governance

II. Operational ResponseLending expected to be higher than pre-2009 owing to higher demand, complemented by

improved disbursements and a strong Analytical & Advisory Assistance (AAA) program

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CONCLUSIONS