the facility for investment climate advisory services 2013 annual review

7/22/2019 The Facility for Investment Climate Advisory Services 2013 Annual Review

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World Bank Group

With support from:

FIASTHE

FACILITYFOR

INVESTMENTCLIMATE

ADVISORY

SERVICES

ANNUAL

REVIEW2

013


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2014 The World Bank Group

1818 H Street NW

Washington, DC 20433

Telephone: 202-473-1000

Internet: www.worldbank.org

All rights reserved.

This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this

volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent.

The World Bank Group does not guarantee the accuracy of the data included in this work.

Rights and Permissions

The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be

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For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright

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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher,

The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422;

e-mail: [email protected].

About the Facility for Investment Climate Advisory Services (FIAS)

Through the FIAS program, the World Bank Group and donor partners facilitate investment climate reforms in developing

countries to foster open, productive, and competitive markets and to unlock susta inable private investments in sectors that

contribute to growth and poverty reduction. The FIAS program is managed by the Investment Climate Department under the

joint oversight of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and theWorld Bank (IBRD). For more information, visitwww.wbginvestmentclimate.org.Cover and interior photo credits, p. 77.


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1

Message from the Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Main Achievements and Milestones. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Special Topic: Promoting Market Competition through Investment Climate Interventions . . 12

Operational Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Core Thematic Areas in Investment Climate Interventions . . . . . . . . . . . . . . . . . . . . . 34

Collaboration, Knowledge and Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Financial Results and Resource Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Annex 1: Reforms and Other Results Supported by FIAS in FY13 . . . . . . . . . . . . . . . . . . . . . . . 62

Annex 2: Portfolio of FIAS-Funded Projects in FY13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Annex 3: Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Contents


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2 2013 ANNUAL REVIEW FIAS - THEFACILITY FORINVESTMENT CLIMATE ADVISORY SERVICES

It is my pleasure to present the FIAS 2013 Annual Review,

reporting on key achievements, milestones, and results within the

context of the FIAS FY1216 strategy cycle.

With the global economy slowly emerging from a protracted economic downturn, higher growth rates in some

developing countries are attracting investors and entrepreneurs. Overall, however, developing countries havenot recovered to pre-crisis growth and are striving to catch up. FIAS projects have helped unlock investment

in key industries, facilitate business entry, streamline the flow of imports and exports, eliminate cumbersome

regulation, and establish predictable fiscal and regulatory regimes. We strive to bring the benefits of private

sector-led growth to the poorest countries in the world. Our primary clients are indeed the countries served by

the International Development Association (IDA), many of which are in Sub-Saharan Africa, as well as countries

hampered by the effects of conflict and instability. Two years into the FIAS strategy, we are fully engaged and

delivering concrete results in our three strategic priorities: fostering enterprise creation and growth; facilitating

international trade and investment; and unlocking sustainable investments in key industries.

In fiscal year 2013, FIAS-funded activities have yielded a notable increase in reforms: 75 significant changes

affecting the business environment and private sector activity in 41 client countries and five regions have been

implemented by our clients. Ultimately, however, our value added is not just advice, nor even the resulting

reforms, but rather the investment generated and jobs created from these activities. While precise numbers

are hard to come by and indirect effects of our reforms are not reported on, FIAS-supported projects directly

contributed to $329 million in new investment in FY13, tripling last years level, and we are on track to meet or

exceed the target for the overall strategy cycle.

One-third of our reforms have been achieved

in fragile and conflict-affected states. A record

94 percent of clients expressed satisfaction

with the advisory services provided by IFCs

Investment Climate Business Line in FY13,

through which a majority of FIAS-funded

programs are implemented.

FIAS-supported projects ultimately foster

thriving private sectors, where business

entry, licensing, competition, trade, and

a fair regulatory environment promote

MESSAGE FROM THE DIRECTOR

FIAS projects have helped unlock

investment in key industries, facilitate

business entry, streamline the flow

of imports and exports, eliminatecumbersome regulation, and establish

predictable fiscal and regulatory

regimes.


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and encourage entrepreneurship and investment. ThisAnnual Reviewhighlights our work in the area of

competition policy, which is gaining momentum and where FIAS is emerging as a global thought leader.The degree of competition in key markets in developing economies lags far behind developed countries,

hampering firm productivity and reducing the competitiveness of domestic firms. More than 40 percent

of emerging markets exhibit a monopolistic structure. In Sub-Saharan Africa, for example, regulations and

practices restrict business entry in sectors that are key for doing business such as financial services, air

transportation, telecommunications, and professional services, and limit the ability of existing firms to

compete. FIAS-supported teams are producing measurable results in countries as varied as Armenia, El

Salvador, Honduras, Kenya, and Tunisia. Addressing rules that limit competition is a priority area of focus for

FIAS-supported work.

Implementation of the five-year FIAS strategy is unfolding at a time of change and renewal in the World Bank

Group. The reorganization being led by World Bank Group President Jim Kim emphasizes themes and areas

of activity in which the Investment Climate Department already has a strong record. President Kim stresses

the importance of global knowledge, flowing just in time to the countries that need it: The FIAS model is

built on developing and sharing global knowledge on investment climate reform, delivered through regional

and country teams. President Kim wants a more integrated World Bank Group, where the World Bank, IFC,

and MIGA work more seamlessly together: FIAS is a World Bank Group facility, implemented through the

Investment Climate Departmentthe only joint World Bank Group operational department. He also wants

more effective, focused, and timely delivery of services to clients: The FIAS business model relies on

specific product expertise deployed rapidly in partnership with other World Bank Group units and our donors,

and supported by a strong results focus (Managing for Impactis the title of our FY12-16 strategy). Likewise,

FIAS projects and programs bring an important dimension to the Shared Prosperity agenda, with our

focus on the private sector as the key engine of sustainable growth, and on helping the poorest countries

maximize their economic potential, thus contributing to the elimination of extreme poverty. In FY13, we

deepened our collaboration with IFC, World Bank, and MIGA teams, partnering with more than 45 different

World Bank Group units to leverage maximum results from FIAS-supported programs.

We are immensely grateful to our FIAS donors and partners, not only for their financial support which is

core to our business model, but also for their substantive engagement in multiple areas of our work, from

designing specific interventions to shaping our ambitious impact evaluation program.

Pierre Guislain

Director

Investment Climate Department and FIAS

World Bank Group


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MAIN ACHIEVEMENTSAND MILESTONES1 In fiscal year 2013, the pace of FIAS-supported investment and reformaccelerated, yielding tangible resultsand increased client satisfaction.FISCAL YEAR 2013


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5

94%

$329in new investmentgenerated, more than athreefold increase overFY12 total

client satisfaction rating,a three percentage pointincrease from FY12 rating

75reforms, 63 percent growthin the number of reforms,up from 46 in FY12

million


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In FY13, FIAS-funded activities continued to deliver the results and outcomes expectedunder the FY1216 strategy. Strong momentum is the theme of FY13. FIAS-fundedactivities produced a substantial increase in the number of investment climate reformsimplemented in client countries, generated $329 million in new investment from FIAS-

supported work on key industries, and supported projects that have achieved high levelsof development effectiveness ratings and client satisfaction. Through the work we dowith client governments, FIAS projects help private sector investors and entrepreneursby creating a level playing field for enterprise, streamlining regulation, easing businessstart-up, and fostering competition and trade.

I

Europe and Central Asia: 10

East Asia and Pacific: 1SouthAsia: 1

Sub-Saharan Africa: 49

Benin

Burkina Faso

Burundi

Chad

Cameroon

Comoros

Congo, D.R. of

Cte dIvoire

Djibouti

Gabon

Guinea

Guinea-Bissau

Liberia

Malawi

Mauritania

Mozambique

Niger

Rwanda

So Tom and Prncipe

Senegal

Swaziland

Togo

Uganda

Zambia

Armenia

Belarus

Kosovo

Moldova

Ukraine

Bangladesh Timor-Leste

Colombia

Costa Rica

El Salvador

Guatemala

Haiti

Honduras

Jamaica

Nicaragua

Panama

Trinidad and Tobago

Latin America andthe Caribbean: 14

Momentum

Impact and Reform Total FIAS-supported reforms: FIAS-funded activities in

FY13 contributed to 75 reforms in 41 countries (46reforms in 30 countries in FY12); 56 of these reforms,or 75 percent, were validated by the World Bank GroupsDoing Business 2014report (in FY12: 78 percent); of the

other 18 reforms, 14 were on topics not covered byDoing Businesswhile 4 involved Doing Businesstopics

but achieved benefits not tracked by Doing Business.(See FIAS-supported reforms table on p. 10.)

Regional distribution: 65 percent of reforms occurred in

Sub-Saharan Africa; 19 percent in Latin America and

the Caribbean; 13 percent in Europe and Central Asia;1 percent in East Asia and Pacific; 1 percent in South

Asia.

FIAS-Supported Reforms by Region100% = 75 Reforms

n Sub-Saharan Africa, 49 (65%)

n Latin America and theCaribbean, 14 (19%)

n Europe and Central Asia,10 (13%)

n East Asia and Pacific, 1 (1%)

n South Asia, 1 (1%)

FIAS-Supported Reforms by Region and Strategic Priority, FY13

Strategic Priorities - Key

Fostering Enterprise Creation and Growth

Unlocking Sustainable Investment

Facilitating International Trade


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27 additional reforms achieved by the InvestmentClimate Business Line and at least $92 million in

investment generated from activities not funded byFIAS benefited from expertise and knowledge

contributed by FIAS-supported teams.

Doing Business 2014 lists 10 countries as showing

the most improvement across three or more areasmeasured in the report. All 10 have benefited from

FIAS-funded projects, and sevenBurundi, CtedIvoire, Djibouti, Guatemala, Kosovo, Rwanda, and

Ukraineimplemented FIAS-supported reforms

in FY13.

FIAS-Supported Reforms by Region and StrategicPriority, FY13 Industry-specic projects in Bangladesh, Brazil,

Haiti, and Rwanda reported generating $329

million in new investments compared with $108million in investment generated reported in FY12.1

1 FY12 investment generated numbers were revised from $120 million to $108 million based on corrections acquired from investor surveys in the FIAS-funded project in Brazil.2 International Development Association (IDA) countries are those reporting per capita income in FY13 of less than $1,195 and lacking the financial ability to borrow from the International

Bank of Reconstruction and Development of the World Bank Group.

100%

80%

60%

40%

20%

0%

Results by Priority Client Group, FY13Share of Total Reforms and Client-Facing Project Expenditures

Compliance cost savings for FY13 surpassed $30million for five projects where the data has been

validated. Another $16 million of compliance cost

savings is being validated.

Focus on Priority Client Groups: Conflict Situations,

Low-Income Countries, Sub-Saharan Africa Reform totals in priority client areas are in linewith associated expenditures. IDA countries2accounted for 76 percent of reforms and 78

percent of expenditures; Sub-Saharan Africa, 65

percent of reforms, 57 percent of expenditures;and countries in fragile and conflict-affected

situations, 32 percent of reforms and 28 percentof expenditures.

The planning, expenditures, and results of FIAS-supported work are in close alignment.

IDA-eligible countries Sub-Saharan Africa Fragile and conflict-afflictedsituations

n Share of Client-Facing ProjectExpenditures (Targets)

n Share of Client-Facing ProjectExpenditures (Actual)

n Share of Total Reforms


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Investment Climate Department: DevelopmentEffectiveness and Client Satisfaction3

Development effectiveness4rating for FIAS-funded

projects dropped three percentage points to 83 percent

but remains significantly higher than FY08FY11 ratings.

Six FIAS-funded projects belonging to three different

regions closed in FY13. Five of these had positive

development ratings.

Client satisfaction with advisory services provided by

IFCs Investment Climate Business Line in FY13,through which a majority of FIAS-funded programs

are implemented, reached 94 percent.

FIAS-supported projects received a client satisfaction

rating of 92 percent (FY12: 95 percent).

Strong Results in FY13 across the FIAS Portfolio Of 69 client-facing projects, 29 were implemented by

the World Bank Groups Investment ClimateDepartment; the remaining 40 were managed by

regional units.

Total project expenditures reached $22.9 million ($19.1

million in FY12), with $15.7 million going to client-facing projects ($14.1 million in FY12), and $7.2 millionto knowledge management and product development

activities ($5 million in FY12).

The share of expenditures on industry-specic activitysupported by FIAS rose in FY13 to 17 percent, with

an increased focus on work in agribusiness, tourism,and manufacturing. This compares with 13 percent

attained in FY12 and continues an upward trend of

sector work in the Investment Climate Department,up from 7 to 8 percent during the FY0811 FIAS

strategy cycle. Efforts must continue to maintain theupward trend and reach the 30 to 40 percent target laid

out in the FIAS FY1216 Strategy.5

FIAS-funding was used to conance 49 projects

directly managed by the Investment ClimateDepartment (including 20 non-client-facing projects

focused on knowledge management and productdevelopment), and 40 projects managed by regional

IFC Advisory Services units.6

Total budget for these FIAS activities amounted to$141 million; total project spending in FY13 was $30.3

million, of which spending from FIAS sources of fundswas $15.7 million.

FIAS-funded project spending for non-client-facing

activities related to knowledge management andproduct development projects amounted to $7.2 million

(from $5 million in FY12).

Total Expenditure by Thematic Priority ofClient-Facing Projects, FY13100% = $15.7 Million

n Business Regulation for Enterprise Creation and

Growth (47%)

n International Trade andInvestment (30%)

n Investment Climate forIndustry (19%)

n Other (4%)

100%

80%

60%

40%

20%

0%

FIAS Development Effectiveness Ratings, FY08-FY13(Share of completed projects with positive rating)

FY08 FY09 FY10* FY11* FY12 FY13

*DE recalculated to reflect FIAS portfolio.

83%86%

67%73%

57%47%

94%100%

80%

60%

40%

20%

0%

Investment Climate Business LineClient Satisfaction, FY08-FY13(Share of clients satisfied)

FY08 FY09 FY10* FY11* FY12 FY13

91%89%88%85%92%

3 Majority of Investment Climate Department projects are FIAS funded.4 Development effectiveness rating is a synthesis of the scores on strategic relevance, output achievement, outcome achievement, impact achievement, and efficiency dimensions

at completion.5 Investment Climates work in special economic zones, which previously represented a sizeable part of industry sector work, was transferred in F Y12 to the Competiti ve Industries Global

Practice and so is excluded from the figures provided. Accounting for special economic zones work, the FIAS 0811 baseline wouldstand at 15 percent, and the FY12 and FY13 share would stand at 18 percent and 19 percent respectively.

6 Receiving at least 10 percent of their FY13 spending from FIAS trust funds and other FIAS-related funding sources.


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Regional spending distribution is highest for Sub-

Saharan Africa with 57 percent, followed by Europeand Central Asia and World Projects at 11 percent

each.

Funding administered via FIAS contributed to 27percent of total Investment Climate Business Line

spending in FY13, and FIAS funding was involved in

projects that supported the implementation of 73percent of all Business Line reforms (75 of 102

reforms).

The increasing share of expenditures devoted to

knowledge and product development, from 26

percent in FY12 to 32 percent in FY13, reflects theshift to knowledge products in line with the FIAS

strategy.

Business regulation activities drew the largest share

of expenditures in FY13 with 25 percent, followedclosely by business taxation work, indicator-based

reform advisory, and industry-specific activities.

Project Expenditures

by Product, FY13100% = $15.7 Million

n Business Regulation (25%)n Industry-specific Real Sectors, and

related (19%)

n Business Taxation (17%)

n Indicator-based ReformAdvisory (16%)

n Trade Logistics (9%)

n Debt Resolution & Business Exit (5%)

n Other (5%)

n Investment Policy (4%)

n Sub-Saharan Africa (57%)

n Europe and Central Asia (11%)

n World (11%)

n Latin America and the Caribbean (8%)

n Middle East and North Africa (5%)

n South Asia (5%)

n East Asia and Pacific (3%)

Total Project Implementation Expenditures, FY13100% = $22.9 Million

Client-Facing Expenditure by RegionTotal Expenditures by Type

Client-Facing$15.7 M (68%)

Non-Client-Facing$7.2 M (32%)


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1 0 2013 ANNUAL REVIEW FIAS - THEFACILITY FORINVESTMENT CLIMATE ADVISORY SERVICES

FIAS-Supported Reforms by Region and Country, FY13

Region Country Alterna

tivedispute

resolution

Constru

ctionpermits

Enforcingcontracts

Getting

electricity

Industry-specific

investm

entclimate3

Inspect

ions

Investo

rprotection

License

sandpermits

Propert

ytransfers

Resolvinginsolvency

Specialeconomiczones

Starting

abusiness

Taxsim

plificationand

complia

ncemanagement

Tradelo

gistics

Total

EAST ASIA AND PACIFIC Timor-Leste1, 2 1

EAST ASIA AND PACIFIC TOTAL 1

EUROPE AND CENTRAL ASIA Armenia1 * 3

Belarus 1

Kosovo1, 2 3

Moldova1 2

Ukraine 1

EUROPE AND CENTRAL ASIA TOTAL 10

LATIN AMERICA AND THECARIBBEAN

Colombia 2

Costa Rica 2

El Salvador 1

Guatemala

2Haiti1,2 1

Honduras1 1

Jamaica 1

Nicaragua1 1

Panama 2

Trinidad and Tobago 1

LATIN AMERICA AND THE CARIBBEAN TOTAL 14

SOUTH ASIA Bangladesh1 1

SOUTH ASIA TOTAL 1

SUB-SAHARAN AFRICA Benin1 2

Burkina Faso1 * 2

Burundi1, 2 6

Cameroon1 1

Chad1, 2 1

Comoros1, 2 2

Congo, Dem. Rep.1, 2 1

Cte dIvoire1, 2 4

Djibouti1 1

Gabon 2

Guinea1, 2 2

Guinea-Bissau1, 2 1

Liberia1, 2 1

Malawi1 1

Mauritania 1

Mozambique1 3

Niger1 2

Rwanda1 7

So Tom and Principe1 * 1

Senegal1 1Swaziland 2

Togo1, 2 1

Uganda1 2

Zambia1 * 2

SUB-SAHARAN AFRICA TOTAL 49

GRAND TOTAL 1 9 2 2 5 4 2 4 11 2 1 20 2 10 75

Reforms captured by Doing Business 2014report NA 9 2 2 NA NA 2 NA 11 2 NA 20 1 7 56

Reforms from FIAS-cofinanced projects mapped to regional IFC AdvisoryServices units.

1 International Development Association (IDA) countries.2 Fragile or conflict-affected situations.

3 Industry-investment climate category includes agribusiness, tourism, and otherindustries.

* Reforms under Doing Businesstopics not validated by the Doing Businessreport.


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FY12 and FY13 Funding and Expenditures

FY12 FY13

Contributions (Sources of Funds) In US$, Thousands Share of Total In US$, Thousands Share of Total

WORLD BANK GROUP CONTRIBUTIONS 12,089 36% 11,754 42%

Core 8,188 24% 8,000 28%IFC 1 4,088 12% 4,000 14%

MIGA 2,500 8% 2,400 8%

World Bank 1,600 5% 1,600 6%

Project Specific/Other Contributions (IFC) 2 3,901 11% 3,754 13%

Donor Contributions 21,390 63% 16,435 58%

Core 5,730 17% 5,532 20%

Programmatic 6,678 20% 5,447 19%

Project Specific 8,982 26% 5,456 19%

Client Contributions 484 1% 90 0.3%

Total Contributions 33,9633 100% 28,279 100%

Less Trust Fund Administration Fees 1,122 1,021

Total Net Contributions 32,841 27,258

Expenditures (Uses of Funds) 1 In US$, Thousands Share of Total In US$, Thousands Share of Total

Staff Costs (including consultants) 19,740 70% 21,855 69%

Operational Travel Costs 5,847 21% 6,099 19%

Indirect Costs (including office and operating costs) 2,455 9% 3,603 11%

Total Expenditures 28,042 100% 31,557 100%

1 Includes FY12 and FY13 Advisory Services adminstration budget and expenditures of approximately $1.2 million provided by IFC to cover a number of Investment Climate Business Line

positions and their related staff and travel costs. 2 Includes IFC project-specific contributions ($2,968,000 in FY12 and $3,084,000 in FY13) to support a range of global knowledge management and product desing initiatives and other IFC

contributions ($934,000 in FY12 and $670,000 in FY13) to support activities indirectly related to projects, including initial project designs, portfolio management, monitoring and evaluation,and knowledge sharing associated with the global portfolio.

3 FY12 donor contributions amended to correct a typographic error in the FY12 Expenditures table on page 6 of the FIAS 2012 Annual Review.


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PROMOTING MARKETCOMPETITION THROUGHINVESTMENT CLIMATEINTERVENTIONS2The increasing pace of FIAS-funded

activities in the competition field reflectsa growing awareness of the connectionbetween healthy business competitionand sustainable development.

SPECIAL TOPIC


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23

24countries with pro-competition work inprogress

technical studies oncompetition policy

13FY13 projects withspecific componentson pro-competition


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Promoting competition in key markets is a special area of focus under the five-year FIAS

strategy cycle, which has led to a significant increase in competition-related projects

supported by the FIAS-funded expert team over the past two years.

Lowering legal and discriminatory entry barriers in specific markets induces existing market

players to invest in innovation, improve the quality of products, and cut costs. Effective

competition rules ensure that market players compete on a level playing field, allowing the

most efficient firms to survive and grow. Consumers benefit from high quality products at

competitive prices, and firms create jobs through expansion and new investment.

High productivity in key input markets such astelecommunications, transport, and professional services

benefits other sectors and sustainably increases

productivity across the economy.

Growth resulting from the multiplier effect of investment

climate reforms is already evident in key markets. For

example, actions by competition agencies to deter anti-competitive behavior in key sectors in KenyaandZambiahave spurred changes in pricesbenefiting cotton farmersin Zambia, and maize and sugar consumers in Kenya.

Additionally in Kenya, opening up competition in pyrethrin

(a pesticide derived from a flower) will lead to at least $3million in investment and growth in exports. The reforms

in Zambia are expected to generate some $10 million inprivate sector savings.

Eliminating anti-competitive regulation in inland water

transport in the Philippinesis expected to spur at least$9 million in additional investment per year in the maritime

sector. An enhanced public procurement framework

open to more competitors in El Salvadoris expected togenerate at least $14 million in savings over the course

of a year as a result of more competitive pricing amongrival firms. FIAS-supported work will continue to expand

targeted, market-level interventions that implement an

effective policy framework for promoting competition. Thepolicy goal is to facilitate entry into markets, ensure a level

playing field, enable firms to freely decide on business andmarket variables, and penalize anti-competitive behavior.

Robust Portfolio Growth in FY13Demand for competition policy work in client countries has

increased steadily. In FY13, the FIAS-funded competitionpolicy team worked with clients and regional teams in

24 countries and two regional blocs (the East AfricanCommunity and the Common Market for Eastern and

Southern Africa), leading to eight improvements in

competition policy in five countries: Armenia, El Salvador,Honduras, Kenya, and Tunisia. The team also finalized

20 knowledge products that encouraged reform work inIFC and World Bank projects. Ongoing interventions are

working to eliminate or improve regulations that tend to

restrain competition and to increase the effectivenessof competition policy implementation in 13 countries:

Cambodia, Honduras, Kenya, Mexico, Moldova, Namibia,

Nepal, Peru, the Philippines, Romania, Rwanda, Uganda,and Zambia.

These efforts fall into three areas of focus. The first helps

clients eliminate market-specific constraints and openmarkets to competition by addressing anti-competitive

product market regulation and discriminatory rules. Thesecond helps clients increase the effectiveness of their

antitrust and pro-competition frameworks, an area that

includes anti-competitive agreements between rivalfirms, effective and non-intrusive merger control policies,

and measures to reduce anti-competitive behavior fromgovernment bodies. The third area aims to minimize

distortions generated by government aid granted on a

selective basis that unduly benefits specific players.

Tackling Anti-competitive Behavior and Regulations forIncreased Productivity and Shared ProsperityWell-functioning markets depend on competitive firm

behavior and market rules and regulations that promote

entry and firm rivalry. Over the past two years, the work ofthe FIAS-supported expert team to prevent anti-competitive

regulation and cartel behavior has been carried out in a totalof 16 countries: Armenia, Cambodia, El Salvador, Georgia,

Kenya, Mexico, Mongolia, Namibia, Nepal, Peru, Romania,Russia, Rwanda, Tunisia, Turkey, and Zambia.

Eliminating and preventing price fixing and market sharingagreements among competitors is critical to preventing

firms from overcharging customers by as much as 42percent compared with a competitive scenario. In Kenya,

for example, the FIAS-supported competition team helpedimplement a new competition framework making clear

that cartel agreements are illegal and enhancing the

governments capacity to expose and punish cartels. InZambia, legal immunity for whistle blowers who provideevidence exposing illegal cartel agreements is seldomavailable due to insufficient secondary regulation to

effectively implement this law. The FIAS-supported teamis helping Zambia implement a comprehensive reform

A Level Playing Field


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program, including working protocols with relevant

government bodies and peer-to-peer learning. These effortswill help replicate successes such as the recent exposure

and elimination of anti-competitive behavior by a fertilizer

cartel that overcharged the government by an estimated

$20 million.

In addition, reducing anti-competitive regulations fosters

productivity growth. FIAS support has focused oneliminating and tackling regulations in key sectors where

they are particularly harmful to the overall economy.As a first step, FIAS support generated a framework

for identifying and assessing such regulations to help

prioritize reform areas (see box below). Client countrieshave employed the framework over the past two years to

eliminate regulations that restrict the number of firms, limitprivate investment in specific industries, or favor particular

firms.

Based on this framework, the FIAS-supported team

has been working on removing restrictions and policiesthat limit private sector participation in client countries.

In 1980, for example,Kenyawas the worlds leadingsupplier of pyrethrin, an organic insecticide made from

the pyrethrum flower. Over the next 30 years, Kenyasshare of the pyrethrin market plummeted from 82 to 4

percent. In large part this was because a state monopoly,

the Pyrethrum Board of Kenya, was the only firmallowed to purchase and process the flowers. The FIAS-

supported team has helped draft reforms and is providingimplementation support to remove this monopoly,

unlocking investment opportunities for at least two local

companies and potentially three international investors.

This effort benefits close to 40,000 farmers who will beable to grow and sell pyrethrum to new manufacturers

and exporters. A project in Cambodia, meanwhile, hasopened up competition among providers of fumigation

services at the countrys main port of entry, reducingfumigation costs by around 40 percent.

Various countries allow professionals to fix prices andestablish regulations that make it harder for new firms

to compete. Kenya, with FIAS support, is working toeliminate minimum prices in insurance and legal services.

Removal of minimum prices for business insurance would

generate at least $18 million in savings.

FIAS support helped eliminate regulations that prevented

competition in public procurement, a key sector in many

client countries. In El Salvador, more than $100 millionin public procurement, or 12 percent of procurement

contracts, was allocated over one year without mandatory

competitive selection. The public procurement bylawswere ambiguous on whether competitive bidding

was required. In some instances only a single bidderparticipated. The FIAS-supported team partnered with

the Competition Agency to support changes to publicprocurement bylaws. Since May 2013, officials must

publicize their procurements via an electronic system and

assure competition between at least three market players.Direct involvement of the private sector and different

government agencies favoring competition was critical toachieving these improvements.

Innovating to Eliminate Anti-competitive Subnational Policies in Mexico

Subnational regulations in Mexico have restricted business entry and tolerated cartel behavior, leadingto higher prices and limited product quality and variety. These negative effects have been seen in theproduction of maize flour and tortillas, sale of retail fuel, professional services, and licensing for groundpassenger transportation.

FIAS-supported advisory services are helping Mexico identify, assess, and remove select anti-competitiveregulations in retail, road transportation, and public procurement in Oaxaca. An opaque registrationprocess and exceptions to competitive bidding procedures in Oaxaca discourages participation in publicprocurement. Legal price fixing and a legal ban on new concessions for certain transportation services

effectively eliminate competition in a sector that employs about 40 percent of Oaxacas labor force. In retailtransportation, regulations on minimum distances, and rules that give incumbents a say in the process forentry and expansion of new and rival firms, limit opportunities for small and medium enterprises.

The FIAS-supported team used sectoral checklists developed as part of a competition toolkit to designindicators showing how subnational regulations restricted competition; this encouraged alignment withbest practices and triggered reforms. Two anti-competitive regulations affecting the retail and transportsectors are being eliminated. Other Mexican states that have some of the same problems are taking note.The framework used for identifying anti-competitive regulations is encouraging pro-competition reformsin Mexico state and Tabasco under a reimbursable advisory services arrangement with the World BankGroup in a collaborative effort between the FIAS-supported team and the Bank Groups Latin America andCaribbean Financial and Private Sector Development team.


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Competition Reforms Boost International Trade andSustainable InvestmentFIAS supported efforts in FY13 to eliminate restrictionson competition in transportation, expand investment by

rationalizing the approval of mergers and acquisitions,

and minimize the market distortion caused by unfair

investment incentives. All of these support the broaderFIAS strategic goal of facilitating international trade andinvestment.

A FIAS-funded reform project under implementation in

the Philippinesis expected to significantly lower freightrates of inter-island container shipping and generate $9

million in additional investment in the domestic shippingindustry. Freight rates for local containerized cargo are atleast 47 percent higher than comparable overseas freight

rates. For some major routes, local farmers and merchantsmust choose from only one or two shipping operators

since more than 50 percent of the routes are monopolized.

The team helped the government identify how the current

regulations governing inter-island shipping marketsand lack of competition affect sector performance, forexample, by allowing incumbents to approve the number

of vessels its competitors could deploy. Eliminating theseregulations will allow new investors to enter the shipping

market and lower shipping costs.

In Armenia, regulatory practices favored incumbentsin aviation, leading to fewer flights and significantlyhigher ticket prices than in comparable countries. In

a cooperative effort within the World Bank Group, theFIAS-supported competition team proposed several

measures to eliminate preferential treatment toward the

incumbent airline, establish adequate regulations, andopen routes to competition through changes in air service

agreements (ASAs). The team shared good practices andenabled peer to peer learning with other countries, such

as Morocco, that have taken successful steps to liberalizeair transport and introduce greater transparency. Armenia

has since deregulated air transport and introduced greater

transparency, a package of reforms expected to leadto better flight connectivity, lower prices, and savings

equivalent to 1.4 percent of gross domestic product.

Finally, effective pro-competition policies promotesustainable investment. For example, effective merger

policies, such as appropriate thresholds to determinewhich mergers require mandatory approval, ensure that

investment projects can be executed swiftly and help

governments focus only on transactions that have thepotential to harm competition. In Zambia, raising the

threshold for mandatory approval is expected to generatealmost $1 million in private sector savings per year. Similar

reforms have benefited Kenya and Honduras, and will

facilitate mergers and acquisitions in the Common Marketfor Eastern and Southern Africa, El Salvador, and Romania.

Introducing competition principles in investment policies is

crucial to guaranteeing a level playing field among existingcompetitors and new market entrants. In Moldova, aFIAS-supported project helped to identify several state aid

measures that tended to benefit only a few favored firms.

This practice distorts the market by having governmentpick winners and losers. State aid regulations and the

effective management of the state aid inventory are

expected to prevent these situations and clear the way torewarding the most efficient investors.

Opening Markets in Key IndustriesFIAS-funded industry-specific work in the competition fieldhas helped achieve the objective of unlocking sustainable

investments in agribusiness and tourism. Marketcompetition in agriculture inputs and in the wholesale

and retail marketing of agriculture products are critical.

In the East African Community, FIAS support for theharmonization of seed standards for maize, sorghum, and

soybeans is expected to allow for greater competition indomestic and regional seed markets. Eliminating policies

that distort sugar and maize markets could reduce the

incidence of poverty by at least 3.5 percent. A studycompleted by the competition team on modern retail

markets inArmenia informed technical assistance onavoiding restrictive regulations that discourage marketexpansion and reduce the potential of retail marketingamong Armenian farmers. FIAS support helped Hondurascreate more competitive agricultural input markets for the

benefit of farmers (see box, p. 17).

Competition in the tourism sector covers a varietyof intertwined markets, where improvements have

positive effects on the entire tourism value chain. InTunisia,certain operators have a monopoly over certaintouristic routes, despite a legal framework that promotes

competition. In 2013, the FIAS-supported competitionteam recommended eliminating discriminatory start-

up criteria and issuing a new regulation to allow new

competitors to enter the market for tourist transportservices. The ongoing reform process will result intransport to more tourist sites and specialized tourist

attractions.

Advisory services on pro-competition regulations in air

transportation are expected to generate positive effectsfor tourism in East Africa and Nepal, where regulatoryburdens discourage market entry and capacity expansion.The East African Community Civil Aviation Technical

Committee incorporated 16 recommendations to improvedraft air transport regulations for the region, ensure a level

playing field among carriers from different partner states,

and spur competition on regional routes. In Nepal, advice

to facilitate connectivity and competition in essentialservices for international routes will benefit 75 percent oftourists who arrive by air. Better consumer information

can generate more competitive markets. This is the aim

of FIAS-supported reforms to be carried out in Nepalshospitality services, where a system for quality rating will

facilitate consumer choice and encourage competition.Considering competition principles in the design of

government concessions for hotel infrastructure has

proved to be important in projects in Sub-Saharan Africa.


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17

Benefiting Honduras Farmers through Competition Reforms

Agribusiness in Honduras contributes about 13 percent to GDP and produces more than two-thirds of allexports. Productivity, profitability, and international competitiveness depend on the availability of highquality and reasonably priced agricultural inputs such as pesticides and fertilizers. But key agricultureinputs in Honduras cost much more than in neighboring countries, and variety and quality are limited.

Regulations intended to ensure safe use of fertilizers and pesticides wound up benefiting certain suppliersand limiting the competitiveness of small and new firms. Cumbersome registration procedures delayedcommercialization of potentially better products.

The FIAS-supported competition team worked with the Honduran Secretary of Agriculture and Livestockto introduce reforms that increase competition in the agricultural input market. The Honduran CompetitionAuthority identified several issues stifling competition in the market, resulting in higher entry costs, morebusiness risk for firms, and higher prices and limited availability of agricultural products for farmers.Advantageous treatment given to certain suppliers, the Authority found, delayed the commercialization ofnew products and created unpredictability within the registration process.

The World Bank Group helped Honduras map the registration process. Three process manuals weredeveloped to assist staff with technical and legal evaluation procedures, helping reduce discretionary andarbitrary treatment of firms. Relevant regulations were published for public use, and formal checklists ofdocuments required for registration were disseminated to stakeholders. Among the results were:

nOptimized registration procedures for agricultural inputs.

nEnforced process manuals to ensure consistency and equal treatment of applicants.

nAn online database of registered input products and their associated crops by firm, with trackinginformation on the product registration process.

Now, approximately 35,000 farmers have access to lower-priced agricultural inputs (up to 9 percent lowerfor certain products) and more products are available to help farm productivity. In 2013, 300 products wereregistered, as compared to 68 in 2011. In some cases, average registration times decreased from around 220days (as much as three years in one case) to less than 90 days.

Sharing Knowledge about Competition Reforms in theDevelopment AgendaCompetition interventions have the potential to be truly

transformational. Opening a particular market or tacklinglarge cartels affecting the poor have large impacts, but

they are risky undertakings that may require a longer

timeframe. The approach to improving competitionthrough FIAS programs takes into account the importance

of generating relevant data for identifying and assessingreform needs and advocating with ex-ante estimations to

generate demand for competition reforms.

Estimates of the benefits and savings that greater

competition can generate have proved useful to gathering

stakeholder support for competition reforms. Theestimations are typically carried out at the sector level,

measuring the effects of competition on key variables suchas productivity, prices, and consumer welfare. Results are

shared with policymakers and stakeholders with an eye to

increasing demand for pro-competition reforms.


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In Tunisia, the competition team calculated that the Tunisianeconomy could gain up to 5 percent in labor productivityper year if margins between the price of products and the

cost of producing them declined by 5 percentage points

as a result of more contestable markets. These potentialgains informed the governments discussion to change the

current competition rules and improve its implementation

in key sectors such as telecommunications. In Armenia,the team estimated that consumer losses due to limited

competition in food markets were at least $87 million peryear, 2.3 percent of per capita gross domestic product(see box, p. 26). The team also calculated that Turkeyslabor productivity growth would have been 4.5 percent

higher each year between 2003 and 2008 if the degreeof competition intensity had been 10 percent higher

during this period. The FIAS-supported team analyzed

nine Latin American and Caribbean countries to showhow less restrictive regulations correlate with increased

entrepreneurship. Results of the research have informedpolicy recommendations for Mexico and Honduras and

influenced the private sector development agenda in

Costa Rica, Dominican Republic, El Salvador, Jamaica, and

Peru. This is an example of how, in addition to technical

considerations, the team works to identify early on allies,champions, and beneficiaries of competition interventions

to generate reform momentum.

Fostering Peer-to-Peer Learning among Reformers

FIAS funding was used to support the organizationof a peer-to-peer learning forum ahead of the annual

conference of the International Competition Network(ICN) held in Warsaw in April 2013. This pre-conference

forum served as a platform for exchange among morethan 100 representatives from the worldwide competition

community who shared valuable lessons on how to

introduce competition into key markets. The consensuson the importance of influencing policymakers about

economic losses due to a lack of competition inspiredfurther commitment from government participants to

implement reforms in at least three regions. Armenia,

for example, benefited from direct interaction withcounterparts that had successfully carried out reforms in

air transportation; this interaction then informed Armenian


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19

aviation policy. Overall, the forum was praised as among

the best pre-ICN conference events in recent years.

With support from the FIAS-funded team and the CanadianInternational Development Agency (CIDA),7a peer-to-peer

event in Lima, Peru, provided another forum to discuss

the benefits of integrating competition policy principles

into government policies. The event attracted internationalexperts and 40 government representatives from 14countries in the Latin and Central American region. Overall,

the discussion on competition reform work generatedhigh-level interest in developing a regional initiative among

Central American countries to facilitate trade with the

promotion of competition as a pillar.

Competition work is undertaken in collaboration withexternal development partners such as the Organization

for Economic Co-operation and Development (OECD),the International Competition Network, and experienced

competition agencies to ensure synergies in encouragingcompetition and strengthening competition policy in client

countries. In addition, the FIAS-supported team provides

extensive cross support throughout the World Bank Group

and in FY13, it has collaborated with 18 units to implementcompetition reforms or conduct studies to identify areas

for potential reform and estimate the expected benefits.

Advisory services that incorporate competition objectives

have expanded throughout the Bank Group. Efforts to

identify competition issues have been applied by WorldBank and IFC teams in 16 countries across all regions,including seven IDA countries. By the end of June 2013,

11 IFC projects with implementation plans approvedin FY13 included objectives that aimed to increase

competition in specific sectors or economy-wide. Just

over half of projects in agribusiness, tourism, tradelogistics, and investment policy embedded competition

principles in their project design and implementation.Overall, over the past three years, demand for

competition policy work has seen a significant increase,

from nine countries with competition interventions in2011 to 24 in 2013 (see below).

7 CIDA is now known as Foreign Affairs, Trade and Development Canada.

40

30

20

10

0

Subnational(economy wide and sector-specific)

Sector-specific

Economy-wide

Economy-wide and sector specific

Significant Increase in Advisory Services Projects with Pro-competition ComponentProject Portfolio Evolution

Pro-competition interventions, by type

FY10 FY11 FY12 FY13

25

20

15

10

5

0

South Asia

Middle East and North Africa

East Asia and Pacific

Sub-Saharan Africa

Latin America and the Caribbean

Europe and Central Asia

Number of countries with pro-competition interventions in design or implementation,by region(excluding regional projects)

FY10 FY11 FY12 FY13


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OPERATIONALHIGHLIGHTS3 In fiscal year 2013, FIAS fundingcontinued to emphasize supportfor Sub-Saharan Africa, fragile andconflict-affected states, as well as IDAcountries.


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21

65%

76%share of total reformsin IDA countries

share of total reforms inSub-Saharan Africa

32%share of total reforms infragile and conflict-affectedsituations


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FIAS funding delivered on a portfolio that totaled 49 projects at the end of FY13 mappedto the World Bank Groups Investment Climate Department (53 in FY12). In addition therewere 40 projects mapped to regional IFC Advisory Services units (19 in FY12). The total

of 89 projects (69 of them client-facing) includes a sharp increase in the regional IFCprojects, reflecting the emphasis on collaboration across the World Bank Group in thedelivery of advisory services. Four industry-specific projects generated $329 million innew investment in FY13, up by more than three times from the $108 million generatedin FY12.8

Helping Fragile States

The FY13 portfolio shows continued momentum in

investment climate work focusing on countries in fragileand conflict-affected situations. Project expenditures in

these countries were up 34 percent in FY13 and FIAS-

supported investment climate activities yielded 24 reformsin a dozen fragile and conflict-affected countries, up from 11

reforms in six fragile countries in FY12 (see box below).

FIAS-funded investment climate projects were recognized

within the World Bank Group and by client countries forinnovation and effectiveness in FY13, and also for fostering

collaborative approaches drawing expertise from differentparts of the Bank Group to offer clients holistic solutions

to investment climate issues. Projects in Brazil, the Europe

and Central Asia Region, Haiti, Rwanda, and So Tom

and Prncipe, were among winners of World Bank Groupawards.

The FIAS-funded portfolio delivered results to clients on an

accelerated pace in FY13 in three strategic themes identifiedas crucial to the success of the five-year strategy cycle:

n Fostering enterprise creation and growth.

n Facilitating international trade and investment.

n Unlocking sustainable investment opportunities

in key industries, particularly agribusiness and tourism.

This chapter presents highlights of FIAS efforts in each of

FIAS-Funded Activities in Fragile and Conflict Situations in FY13Active projects in 17 of 35 countries on the Harmonized List of Fragile Situations:

East Asia and the Pacific: Timor-Leste.

Europe and Central Asia: Bosnia and Herzegovina, Kosovo.

Latin America and the Caribbean: Haiti.

Middle East and North Africa: Afghanistan.

South Asia: Nepal.

Sub-Saharan Africa: Burundi, the Central African Republic, Chad, the Comoros, the Republic of Congo, theDemocratic Republic of Congo, Cte dIvoire, Guinea, Guinea-Bissau, Liberia, Togo.

Reforms Achieved in FY13

24 reforms, representing one-third of all FIAS-funded reforms in FY13, achieved in 12 countries: 6 in Burundi;4 in Cte dIvoire; 3 in Kosovo; 2 each in Chad and Guinea; and 1 each in the Comoros, Democratic Republicof Congo, Guinea-Bissau, Haiti, Liberia, Timor-Leste, and Togo (up from 11 reforms in 6 countries in FY12).

FIAS Client-Facing Project Expenditures in Fragile and Conflict Situations

$4.4 million in expenditures, or 28 percent of total client-facing project spending. This is a 34 percent increasefrom the $2.9 million, or 21 percent, of client-facing project spending in FY12.

8 FY12 investment generated numbers were revised from $120 million to $108 million based on corrections acquired from investor surveys in the FIAS-funded

project in Brazil.


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23

these areas. In line with the FIAS FY1215 strategy, the

continued trend is for scaling up work in the industry-specific sectors, stemming from the growing recognition

that within individual countries, some of the most

significant barriers to growth reside in specific industries.Industry-specific work is up markedly to 19 percent

of client-facing project expenditures, and it is on track

to reach the target share of 30 to 40 percent by FY16.Activities related to enterprise creation and growth remain

the biggest area of FIAS-supported work, accounting for47 percent of expenditures on activities in the FIAS-funded

portfolio. International trade and investment accounts for30 percent of expenditures.

Starting Businesses and Fostering their GrowthThe FIAS strategic theme of fostering enterprisecreation and growthsupports advisory services andthe implementation of reforms that apply across a client

countrys economy. This priority entails such effortsas improving the regulatory environment for business

registration, streamlined systems for resolving businessdisputes, and fair and efficient procedures for managinginsolvency and business exit. In FY13, FIAS built and

expanded on work in all of these areas. FIAS-fundedactivities under this strategic priority fall into three areas:

business regulation, debt resolution and business exit, and

indicator-based reform advisory.

Regulations Enabling the Ease of Business Entry and OperationsThe FIAS-supported business regulation program

assists client governments in improving the regulatoryenvironment for business activities. In particular, the

program supports legal, institutional, and regulatory

reforms aimed at reducing the burden of starting andoperating a business and improving the overall quality,

consistency, and effectiveness of regulation. A critical partof this effort has involved helping countries harness the

power of information and communication technologies(ICT) to create more transparent and efficient online

systems in place of inefficient and often duplicative paper-

based regimes.

A key development in FY13 was the roll-out of a new

strategy placing a stronger emphasis on the quality and

sustainability of reform efforts. Through an improvedregulatory framework, the business regulation program is

focusing on the implementation of reformed regulationsand building the capacity of regulatory agencies to

deliver services to the private sector in a transparent andefficient manner. It is also exploring synergies with otherFIAS-supported initiatives like the sector-specific work

to increase the impact of the reform solutions offered toclients.

In Burkina Faso, reforms have dramatically eased theburdens of starting a business, reducing costs by morethan 50 percent and the time to open a company from 40

days in 2004 to 13 days in 2013more than three weeks

faster than the Sub-Saharan Africa average. According

to an external evaluation, these reforms have yielded $8

million in private sector investments, the formalization of1,000 new businesses and the establishment of about

2,400 new jobs within the past three years. Licensing,

a major constraint to doing business in Burkina Faso, ison the path to being streamlined. In FY13, the program

prepared an inventory of all business licenses in the

country. More than 300 licenses were identified andrecommendations were submitted to the government,which established a secretariat to lead the licensing reform

process in January 2013.

Saturnin Zoetany recently took advantage of Burkina Fasos

new streamlined business procedures and registered hiscompany, Zoetanyande Distributing, which manufactures

and sells yogurt to an expanding market, now includingseveral large hotels. I started my first informal business

when I was 12 years old, making yogurt and goat cheese

in my aunts kitchen. I now employ six people and have asmall farm where we raise goats and cattle to supply the

milk for the yogurt, says Zoetany. Only 23 years old, he

is quickly establishing himself as one of Burkina Fasosbrightest young entrepreneurs.

As a member of the Organization for the Harmonizationof Business Law in Africa (OHADA), a unique organization

that enacts common business laws for 16 member

countries, Burkina Faso has recently endorsed a seriesof measures to significantly reduce costs and increase

access to credit, and to encourage the developmentof economic activities. During FY13, a number of

training sessions for national stakeholders were held inOuagadougou and Bobo-Dioulasso to raise awareness of

the OHADA-inspired reforms.

In Burundi, a country still recovering from civil war,

regulatory changes offer entrepreneurs new opportunitiesto rebuild. With FIAS support, Burundi has pushed ahead

with its reform agenda in FY13, making it easier for newfirms to register and pay taxes, obtain building permits,

and start a business. Burundi was recognized in Doing

Business 2014as a top reformer for the third year running,recording sustained reforms that are paving the way for

economic growth and job creation.

Since the Burundi Investment Climate Programs launchin November 2010, the pace of business registration has

doubled, increasing from fewer than 674 new businessesregistered per year in 2010 to 1,346 in 2012, a figure that

includes the first half of FY13. The sharp increase stems

in part from the improved ease of registering a business,the 13-day process required in 2010 was cut to five days as

of FY13. The cost of registering a business plunged from145.7 percent of per capita income in 2010 to 17.5 percent

in FY13, reflecting a meaningful savings in a countrywhere the average revenue per capita is $240 per year.

FIAS funding also supported a reform in FY13 to speed upBurundis construction permit process. This has allowed

small businesses to build the infrastructure they requireto grow and thrive. The change was accomplished in part


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by lowering the cost of geotechnical studies needed forbuilding permits, and by a newly created one-stop shop for

construction permits. This reform has reduced the cost ofconstruction permit registration by more than 70 percent

since 2009.

The Burundi Investment Climate Program is launching

an agribusiness program component to open up private-sector opportunities in areas where growth potential exists

and continuing to build on the strong reform momentumthat has been established.

FIAS-funded business regulation projects continueto focus on reforming business entry and business

licensing. The work on construction regulations andbusiness inspections has been scaled up in response

to increased demand from clients. New areas in the

effort to add value include product regulations (standardand certification), procurement payment delays, and

environmental regulations. In addition, the programis focusing more on contributing to public goods and

increasingly applying governance tools, such as beneficiaryfeedback and disclosure of information. For example,Jordanand Tajikistanhave benefited from innovativeFIAS-funded regional projects that enable inspectedbusinesses to provide the government with feedback via

mobile phone application on the quality of inspectionsand to lodge complaints about abuses. Such beneficiary

feedback mechanisms are being piloted to assess theextent to which they reduce arbitrary behavior and lead

to improvements in the quality of government regulatoryservices. The business regulation work has also been key

to creating a better enabling environment for businesses in

fragile and conflict-affected situations as evidenced by thework in Burundi andTimor-Leste(see box below).

Efficient Debt Resolution and Business Exit ProceduresThe FIAS-supported debt resolution and business exitprogram continues to assist countries around the world

in improving their legal, regulatory, and institutionalframeworks for resolving commercial disputes, non-

performing loans, business exit and reorganization, and thecollection of debts.

In FY13, many countries continued to experience the after-

effects of the global financial crisis of 20082011. Many

of the countries experienced reduced demand for goodsand services coupled with constrained access to credit,

resulting in a steep rise in the volume of non-performingloans held by commercial private and state-owned banks.

The inability to effectively resolve these debts in a timely

and cost-effective manner has led an increasing numberof countries to seek reform assistance to modernize their

debt resolution and business exit frameworks, a trend thatspiked noticeably beginning in 2011 (see box, p. 25).

Timor-Leste: A One-Stop Shop for Business Registration Gives Entrepreneurs a Boost

Entrepreneurs in Timor-Leste used to wait 94 days to register their start-ups or renew their businesslicenses. Since the opening of the one-stop shop for businessServio de Registo e Verificao Empresarial(SERVE)in June 2013, however, the average wait time has been reduced to 5 days.a

I was shocked when I got a call asking me to come and collect my certificates today, said Lucas Sarmento,owner of LUTTOM Unipessoal Lda, a company based in Dili. I know that this process normally takes six toseven months. I didnt believe it until I came and saw that my registration was already done!

The one-stop shop is part of a FIAS cofinanced investment climate project in Timor-Leste that is aiming tostreamline business procedures and improve the countrys commercial environment.

Ranked 172 of 189 countries in the Doing Business 2014report, Timor-Leste suffers from poor access toinformation and inadequate government assistance, two factors which have stunted commercial growthand entrepreneurship. Over the past three years, the FIAS-funded project has supported the government inimplementing business reforms and establishing a one-stop shop for entrepreneurs and business owners.

In its first week of operation, SERVE was visited by more than 1,000 Timorese business owners, registeredmore than 50 new businesses and renewed hundreds of business licenses. The one-stop shop has locatedtax registration, licensing and business registration under one roof. SERVE has assisted more than 16,000clients to date and compiled cost savings of more than $1 million. In its first three months in operationSERVE registered 1,470 new companies, and about 40 percent of all applicants are women.

In addition to more streamlined registration procedures, half of businesses are now exempt from therequirement to obtain a license following the enactment of the SERVE law in 2012, a FIAS-cofinanced reformthat saves those businesses $458,349 in compliance costs annually. Licensing renewal requirements werealso eliminated, resulting in $66,345 in annual savings for affected businesses(see Annex 1.3).

a. The SERVE one-stop-shop for business opened on June 4, 2013. Results were not reported inDoing Business 2014, which only measured results up to June 1, 2013.


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25

Creating Stronger Insolvency Frameworks in Eastern Europe

With FIAS support, the Moldovan Insolvency Law, passed in September 2012, came into force thefollowing March. The new law is expected to facilitate the restructuring of more viable companies to helpreallocate assets more efficiently into the economy in liquidation proceedings. It creates new restructuringmechanisms, reduces opportunities for appeals, adds moratorium provisions, and establishes strict

statutory periods. It also establishes expedited restructuring procedures which should reduce the timerequired to introduce a restructuring plan and provides for stricter accountability of shareholders anddirectors of insolvent companies.

Similarly, with FIAS support, Belarus adopted a new insolvency law in July 2012. Recommendations fromthe team incorporated into the law include a requirement for insolvency practitioners to notify creditorsindividually of the opening of insolvency proceedings and of the first creditors meeting. The requirementalso specifies the procedure for the cessation of an insolvency practitioners appointment, including settingout concrete reasons for dismissal. These provisions will help make the insolvency process in Belarusmore transparent, provide better legal protection for insolvency process participants, and enhance theinstitutional framework for insolvency practitioners.

Increasing global trade volumes and the complexity of

global supply chains continue to drive both domestic andforeign businesses to seek speedy and efficient dispute

resolution mechanisms. The FIAS-supported program is

providing assistance to countries in developing commercialmediation mechanisms for resolving business disputes,

as well as arbitration regimes. Countries that haveadopted the New York Convention on the Recognition

and Enforcement of Arbitral Awards, for example, haveprovided a measure of comfort to foreign investors that

basic contractual disputes will not be tied up in local

courts.

Technical assistance to the government of Burkina Fasohelped establish the first mediation law in West Africa. The

law, which came into effect in February 2013, establisheda dispute resolution system, now in use, by removingcivil and commercial cases from overburdened domestic

courts. The increases are now settled through moreflexible and cost-efficient mediation procedures, which

is expected to improve access to justice, particularly for

micro and small businesses.

Mediation work has helped fragile states like theComoros, where in May 2013 the Board of Directors ofthe Court of Arbitration of the Comoros formally adoptednew mediation regulations that comply entirely with

international best practices. This new regime should also

serve as a demonstration effect model for other Sub-

Saharan Africa countries within the OHADA jurisdiction.Expected results include:

n A rise in the number of cases referred to

mediation annually.

n Speedier resolution of contract disputes and debt-recovery matters.

n Significant reduction in administrative and

litigation costs.

n Enhanced access to credit for smaller businesses.

Targeted Advice on Key Investment Climate IndicatorsThe FIAS-supported indicator based reform advisoryprogram serves as an entry point for investment

climate programs in response to demand from client

governments. It provides technical assistance in nine keyareas: business start-up, construction permitting, property

registration, access to credit, investor protections, taxadministration, trade logistics, enforcing contracts, and

resolving insolvency.

In FY13, FIAS-funded projects in this area supported

over 25 countries around the world in making regulationmore business friendly. For example, with FIAS support

Cte dIvoirestreamlined business entry and lowered

the cost of property transfer. It also implementedlegislative changes aimed at increasing womens standing

as head of household. In Afghanistan, under a FIAS-supported project, the World Bank Group worked with

the government to improve the business environment.In Togo, another fragile and conflict-affected state, FIASfunding was used to support a combined World Bank

Group effort to improve the countrys one-stop shopsystem for business registration. The effort complemented

improvements in the legal framework provided by OHADAto its member states. Businesses can now be registered

in 19 days in Togo, down from 84 days in 2012. The cost

of registration fell from 177 percent of income per capitain FY12 to 121 percent in FY13. A total of 11,548 firms

benefited from the reformed registration requirementsin FY13.

Facilitating knowledge sharing between client countries

on specific reforms captured by Doing Businessand other

indicators has been a strong continued feature of this workin FY13, with the team organizing several high level events

for policy makers in different regions to learn from eachothers reform experiences(see box, p. 47).


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Support to Subnational Doing BusinessThe FIAS-supported subnational Doing Business project,

funded under the indicator-based reform advisoryprogram, has been deployed successfully around the

developing world for benchmarking business regulationsacross locations within a country. In FY13, the project

was expanded to explore issues such as excessivediscretion in the implementation of rules, regulatoryuncertainty, and transparency. A pilot project in theArabRepublic of Egyptcollected data on the transparency ofregulatory practices of building authorities in 15 Egyptian

governorates, or states. Ongoing projects in NigeriaandCentral Americaaim to assess legal and administrativeconstraints faced by women entrepreneurs at the local

level.

A report, Doing Business in Hargeisa,focusing on a city inthe conflict-affected Somaliland region of Somalia, wasone of three issued in FY13 showing how governmentregulations and their implementation can ease or constrain

business activity; the others focused on cities in Russia

and Italy. The Hargeisa report was the first to providethis kind of data and analysis in Somaliland where, as in

other conflict-affected regions, the generation of jobs andgovernment revenue is essential to establishing peace

and sustaining growth. Smart and transparent regulationsfoster predictability and level the business playing field,

particularly for small and medium-size domestic firms.

The report identified regulatory bottlenecks, highlightedopportunities for improvement, and presented international

and regional good practices.

Sweeping Business Reforms Aid Entrepreneurs in Armenia

Businesses and entrepreneurs in Armenia are benefiting from an ambitious and comprehensive FIAS-funded investment climate reform program. Reforms implemented in FY13 are reducing the costs of doingbusiness and improving regulations in two key areas: inspections reform and food safety. FIAS-fundedadvisory support has helped simplify export procedures for businesses looking to meet rising demand foragricultural products. The introduction of a Food Safety Law has enabled easier access to European Unionmarkets. Start-up costs, the time to register a business, reduced regulations, and a streamlined onlinecustoms clearance system are among the benefits delivered by this effort.

Within the last two years significant changes have taken place, said Harry Megerian, president ofthe Megerian-Shin construction company. I now have time to concentrate on my business, and theburdensome regulations do not impede it anymore.

The FY13 highlights include the following reforms:

Inspections reform:The Armenia Investment Climate Reform project assisted the government withinspections reform, resulting in the merger of the Sanitary and Epidemiology Inspectorate and the LaborInspectorate to form a new Public Safety Inspectorate, reducing the regulatory burden for entrepreneurs.

Food safety: The project has helped the government adopt 30 checklists covering all aspects of a businessthat an inspector or agency is authorized to inspect. The government makes the checklists public and easilyaccessible to businesses, resulting in a more transparent inspection system and significantly reducing thetime businesses need to comply with food safety inspections and regulation.

Armenias broad and comprehensive investment climate reforms have significantly reduced the costsof doing business for entrepreneurs. The reforms have also boosted Armenias global ranking in termsof ease of doing business. From FY11 to FY13, the country moved up 13 places in the overall ranking ofthe World Bank Groups Doing Businessreport (from 50th to 37th of 189 countries and territories), andimproved significantly in the paying taxes indicator (rising from 152nd to 103rd).


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Boosting Trade and Investmentin Developing EconomiesIn FY13, FIAS support under the facilitating internationaltrade and investmentstrategic theme catalyzedinvestment and trade in client countries and advanced

the overall competitiveness agenda. A broad range ofactivities focused on implementing sound investment

policies, efficient trade logistics systems, and effective andtransparent business taxation mechanisms.

Helping Countries Develop and Implement Policiesto Attract and Retain InvestmentsAs a result of the strategic revamping of the investment

policy product under FIAS, in FY13 a set of innovativeareas of technical assistance covering the entire

investment cycle has been developed to help governmentsattract, retain, and benefit from private investment. The

product has focused on developing advisory solutions

in investment policy strategy, investment incentives,investment entry regime, investor protection, linkages

and spillovers, and investment facilitation through regionalintegration. In each of these areas, toolkits providing

step-by-step guidance on the rationale and process of

reform are being developed to assist governments andpractitioners undertaking such reform initiatives.

In FY13, 24 investment incentive activities commenced

in five regions. In Bosniaand Herzegovina, for example,with the help of funding provided by Austria through FIAS,

the government has taken a major step toward creating

a level playing field for investors and strengtheninggovernance mechanisms related to incentives

administration. The government agreed to publish and

disclose the complete inventory of investment incentivesto foster transparency and increase access to information.

In Morocco, FIAS supported the development of a guideand framework, enabling the government to assess the

anticipated costs and benefits associated with investmentincentives. This toolkit provided the foundation for the

government to allocate scarce budget resources in the

most effective way to achieve its desired developmentobjectives.

In Mongolia, FIAS funding was used to help thegovernment remove legal and regulatory barriers toequal treatment for national and foreign investors and

to strengthen investor protection measures. The FIAS

co-funded project helped the government of Mongoliaidentify the underlying causes for the countrys worsening

investment climate. Extensive discussions revealedinvestor concerns about a series of government actions

during the year leading up to elections. In May 2012, in a

politically charged environment, the government passedlegislation perceived as being adverse to foreign direct

investment (FDI). These developments, combined withissues surrounding the Oyu Tolgoi mine negotiations and

the draft mining law, contributed to a 40-percent drop in

FDI to Mongolia in less than a year. Under the FIAS-fundedproject, the World Bank Group advised the government

on options for harmonizing its foreign investment

regime across economic sectors, strengtheninginvestor protection clauses consistent with international

investment agreements, and distinguishing between

investment and tax policies to increase the governmentsability to meet fiscal requirements while adjusting to the

changing nature of FDI.

Facilitating Cross-border TradeFIAS funding supported activities that demonstrated a

strong track record in helping client governments enhancetheir trade logistics systems and services leading to

significant reductions in the time and cost to import

and export. During FY13, the trade logistics programconsolidated its border management interventions and

aligned its work with World Trade Organization TradeFacilitation Agreement articles, thus placing the work in

a broader, more coherent context. It also substantially

increased its agribusiness and supply chain focus. As ofthe end of FY13, trade logistics work entailed 23 projects,

7 of them regional, in a total of 45 countries. These include27 International Development Association countries, 11

of them Sub-Saharan Africa countries, and 8 countriesconsidered fragile and conflict-affected states.

Trade logistics reforms brought about with the help ofFIAS funding and a strong commitment by the government

of Liberiahave helped the West African country recoverfrom years of conflict. The project has supported sustained

reforms aimed at simplifying and reducing the time and

cost to complete import and export transactions. Thishelped shorten the list of product categories subject to

the Import Permit Declaration from 27 to 17. The LiberianBureau of Customs and Excise implemented ASYCUDA

World (the Automated Systems for Customs Data

established by the United Nations Conference on Tradeand Development), enhancing efficiency and transparency

in customs operations. The introduction of e-manifestshas allowed shippers to electronically log manifests via

ASYCUDA World. Liberian traders, including about 15,000firms, have benefited from these improvements and now

enjoy increased access to global markets.

The momentum for significant improvement in areas

integral to private sector growth continued in FY13.Burkina Fasos commitment to reforming government toencourage growth was evident in its FY13 achievements

supported by FIAS. One of the worlds poorest countries,Burkina Faso has been engaged in this effort since 2006.

In the words of Arthur Kafando Patiend, the countrysMinister of Industry, Trade, and Handicrafts: The need to

foster the emergence of a vibrant private sector that will

drive economic growth is at the heart of the governmentsagenda. Trading across borders is now easier following

automation of the rail transit process between BurkinaFaso and Cte dIvoire and elimination of the transit

document requirement for import and export. Tradersmoving goods from Burkina Faso to Togo have also

benefited from a newly interconnected customs clearance

system. The number of truck trips between Lom andOuagadougou was up 17 percent in the first month alone,


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from 3,993 to 4,686. In interviews, truckers indicate theyexpect the number of trips they can manage in a given

time period to double.

In FY13, FIAS funding continued to support regional trade

logistics programs in South Asia, Latin America and theCaribbean, and East and West Africa. In a concerted effort

to integrate developing countries into the global economy,trade logistics projects strengthened systems and services

at and across borders, and realized economies of scalethrough reforms that further regional integration.

With cofinancing support from FIAS, the South AsiaRegional Integration in Trade and Investment Project,

involving Bangladesh,Nepal, and Eastern India, isworking towards improving the overall cargo movement

efficiency at key customs stations between these

countries. The project was launched in August 2012 andquickly began delivering results. Nepal harmonized its

customs working hours with those of India and China,prompting banks in the major customs offices to follow

suit and resulting in a 14-percent increase in the number ofactive trading days. Traders may now submit their personalaccount number, pay value-added tax, and provide firm

registration and agent authorization letters once per yearrather than for each consignment. Additional checkpoints

between the border and Kathmandu have been eliminated,speeding cargo transit. In FY13, Nepal implemented

ASYCUDA in 18 customs offices, allowing traders to enter

declaration data directly in the system.

In the Southeastern Europe region, FIAS supported

the Western Balkans Trade Logistics Project, with itsmandate to facilitate cross-border trade. AlbaniaCustomsintroduced an e-payment system which enabled traders to

pay customs dues online, eliminating the need to submita payment receipt and speeding the release by up to a

day. The project supported negotiations between foodauthorities and customs in Kosovoand Albania towardtheir agreement to facilitate the transit of goods arrivingat the port of Durres, Albania, and destined for Kosovo.

In Bosnia and Herzegovina, the project extended theworking hours of federal inspectors at the three busiest

border crossings with Croatia to align them with the

working hours of Croatia Customs, cutting the lead timefor clearing plant goods by 7.2 percent. These three border

points handle 70 percent of Bosnia and Herzegovinasentire trade volume. In the FYR Macedonia, the project,in collaboration with the World Bank, started training

inspection agency officials to apply a risk-based approachto import controls. This initiative is to be completed in the

fall of 2013, resulting in fewer inspections and sampling,thus speeding up border clearance. In S

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