52854 TH~: WORLD BANK &INTERNATIONAL FINANCE CORPORATION , &INTERNATIONAL FINANCE CORPORATION The World Bank Washington, D.C., U.S.A. "The creation of the Bank was an entirely new venture. ... So novel was it, that no adequate name could be found for it. Insofar as we can talk of capital subscriptions, loans, guarantees, issue of bonds, the new financial institution may have some apparent claim to the name of Bank. But the type of shareholders, the nature of subscriptions, the exclusion of all deposits and ofshort-term loans, the non-profit basis, are quite foreign to the accepted nature of a Bank. However it was accidentally born with the name Bank, and Bank it remains, mainly because no satisfactory name could be found in the dictionary for this unprecedented institution." from The Report ofCommission II (International Bank for Reconstruction and Development) to the Executive Plenary Session (United Nations Monetary and Finan cial Conference), July 21, 1944 The World Bank and the International Finance Corporation l1e World Bank, which consists process in countries that are less of the International Bank for Re developed. construction and Development Of the three institutions, the (IBRD) and the International De IBRD, established in 1945, is the velopment Association (IDA), has oldest and largest. It was conceived one central purpose: to promote nearly forty years ago-at the economic and social progress in United Nations Monetary and Fi developing nations by helping raise nancial Conference held in Bretton productivity so that their people Woods, New Hampshire, United may live a better and fuller life. This States of America, in July 1944. is also the aim of the International Representatives of forty-four Finance Corporation (lFC), which nations assembled there decided works closely with private investors to establish two complementary from around the world and invests financial institutions. The first in commercial enterprises in devel -the International Monetary oping countries. Fund (1MF)-was to promote in The IBRD, IDA, and IFC have ternational currency stability by three interrelated functions: to lend helping finance temporary balance funds, to provide advice, and to of-payments deficits and by provid serve as a catalyst to stimulate ing for the progressive elimination investments by others. The three of exchange restrictions and the institutions are closely associated; observance of accepted rules of in both IDA and IFC are affiliates of ternational financial conduct. The the IBRD. The IBRD and IDA second institution-the Interna share the same staff. While IFC has tional Bank for Reconstruction its own operating and legal staff, it and Development-was to help fi shares certain administrative and nance the reconstruction and devel other services with the Bank. The opment of its member countries. same person is President ofall three The Articles of Agreement of institutions. Unlike the Bank, IFC the IBRD were formally accepted lends without government guaran by a majority ofthe participants by tees, and can take equity positions December 27, 1945. Six months in commercial companies. later, on June 25, 1946, the IBRD Over the years, the IBRD, opened for business and proceeded IDA, and IFC have served to rein to call up capital from its member force one another's work in a vari governments. All the nations which ety of ways. Whether working sepa participated in the Bretton Woods rately or together through joint Conference, except the Soviet projects, their common objective Union, eventually joined the Bank, has been to help poor nations move although Cuba, Czechoslovakia, to that stage ofeconomic strength at and Poland subsequently ceased to which development becomes self be members. sustaining, and eventually to a level The IBRD is owned by the that permits these same nations to governments of the more than 140 contribute to the development countries that have subscribed to its 3 capital. Under the Articles ofAgree The interest rate they carry is re ment, only countries that are mem lated to the interest the IBRD has to bers of the IMF can be considered pay on the money it borrows. In for membership in the IBRD. Sub early 1983, the average rate on new scriptions by member countries to IBRD loans was a little under II the capital stock of the IBRD are percent. Each loan must be made to, related to each member's quota in or be guaranteed by, the govern the IMF, which is designed to re ment concerned. flect the country's relative eco The International Develop nomic strength. ment Association was established in 1960 to provide assistance to the Financial Strength poorer developing countries on The IBRD makes loans only to terms that would bear less heavily creditworthy borrowers. Assistance on their balance of payments than is provided only to those projects IBRD loans. IDA's assistance is that promise high real rates of eco concentrated on the very poor nomic return to the country. As a countries-mainly those with an matter of policy, the Bank does not annual per capita gross national reschedule repayments, and it has product (GNP) of $795 or less (in suffered no losses on the loans it has 1981 dollars). By this criterion, made. It earns a net income which more than fifty countries are eligi amounted to about $600 million in ble. In practice, over 80 percent of both fiscal years 1981 and 1982. A IDA lending goes to countries with substantial part of the income is an annual per capita GNP of less used to strengthen its reserves. The than $410. remainder is transferred to IDA. Membership in IDA is open to The IBRD obtains most of its all members ofthe IBRD, and most funds through medium-term and of them have joined. The funds lent long-term borrowing in the capital by IDA come mostly in the form of markets of Europe, Japan, the contributions from its richer mem United States of America, and the ber countries, although some devel Middle East. Its solid standing in oping countries contribute to IDA these markets is based upon the as well. A small part of IDA's re combination of conservative lend sources come in the form of trans ing policies, strong financial back fers from the net earnings of the ing by its members, and prudent IBRD. IDA credits are made only financial management. to governments. They have to be Apart from borrowings, signifi repaid over fifty years and there is a cant amounts also come from the grace period often years. They carry IBRD's paid-in capital, from its no interest, but there is an annual retained earnings, and from the commitment charge of 0.5 percent flow of repayments on its loans. on the undisbursed amount and a These loans generally are repayable service charge of0.75 percent on the over fifteen to twenty years, with a disbursed amount of each credit. grace period of three to five years. Although IDA is legally and finan 4 International Finance Corporation (IFe) Objectives of the institution To promote economic progress in developing countries by helping to mobilize domestic and foreign capital to stimulate the growth of the private sector. Year established 1956 Number of member countries 124 (April 1983) Types of countries assisted AU developing countries. from the poorest to the more advanced. Types of activities assisted AgribuSiness, development finance companies, energy, fertilizer, manufacturing, mining, money and capital markets institutions, tourism and services, utilities. Lending commitments $580 million (fiscal 1982) Equity investments $32 million (fiscal 1982) Number of operations (fiscal 1982) 65 Terms of lending: Average maturity period 7 to 12 years Grace period An average of 3 years Interest rate (as of April 1. 1983 In line with market rates Other charges Commitment fee of 1% per year on undisbursed amount of loan. Recipients of financing Private enterprises; government organizations that assist the private sector. Govemment guarantee Neither sought nor accepted. Main method of raising funds Borrowings and IFe's own capital, subscribed by member governments. Main sources of funds Borrowings from IBRO. 5 cially distinct from the IBRD, it operating and legal staff, but draws shares the same staff, and the proj upon the Bank for administrative ects it assists have to meet the same and other services. criteria as do projects supported by theIBRD. Growth in World Bank The International Finance Assistance Corporation was established in Between June 1946 and mid 1956. Its function is to assist the 1982, the World Bank-the IBRD economic development of less de and IDA-lent a total of over $105 veloped countries by promoting billion for about 3,300 projects in growth in the private sector of their more than 100 countries. Assis economies and helping to mobilize tance has increased more than four domestic and foreign capital for this fold in the last ten years. The Bank purpose. More than 120 countries has sought to meet the needs of the are members of IFC. Legally and poorest people in the world as it has financially, IFC and the Bank are explored opportunities for high separate entities. IFC has its own priority, economically sound in- World Bank Lending 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 Fiscal Year 6 vestments in developing countries catalytic role, and its involvement that have a total population of in development assistance is greater more than 3 billion. These invest than that indicated by the annual ments have covered a wide range of amount of its lending commit activities. They have helped to de ments of around $13 billion in the velop agriculture, improve educa early 1980s. tion, increase the output ofenergy, expand industry, create better Lending Criteria urban facilities, promote family The success of the Bank's oper planning, extend telecommunica ations depends upon the trust it has tions networks, modernize trans established with borrowers, and portation systems, improve water this trust is based on the experience supply and sewerage facilities, and and technical skills the Bank has establish medical care. demonstrated over the years in More development assistance working with its member develop is provided by the Bank than any ing countries. other single agency, multilateral or Under its Articles of Agree bilateral, in the world. The Bank is ment, the Bank cannot allow itself now assisting investments in over to be influenced in its decisions by 1,600 projects costing, in the aggre the political character of a member gate, nearly $200 billion. Finance country; only economic considera from the Bank typically covers only tions are relevant. Thus, the Bank a little more than a third ofthe cost does not lend in support of military of these projects. The largest share or political objectives. It seeks to is generally raised by the developing ensure that the developing country country from its own resources. gets full value for the money it The Bank's financing is intend borrows. Bank assistance, there ed primarily to help meet foreign fore, is "untied," in that it may be exchange costs. Every project sup used to purchase goods and services ported by the Bank is designed in from any member country-plus close collaboration with national Switzerland, which, although not a governments and local agencies, member, is an important source of and often in cooperation with other borrowings for the IBRD. multilateral assistance organiza Most of the countries that are tions. Indeed , 40 percent of all members of the IBRDare members Bank-assisted projects also receive also of IDA and IFe. The list in financial support from others-bi cludes almost all developing and lateral and multilateral agencies, developed countries. The People's and, in recent years, commercial Republic of China, with a popula banks as well. Many ofthese institu tion of more than 1 billion, is a tions would not have participated member. So is Vanuatu, with a in the development process on the population of slightly more than present scale were it not for the 100,000. Yugoslavia, Romania, Bank's leadership and expertise. and Hungary are members. But Thus, the Bank has an important other East European countries are 7 Operations World Bank Approved Number of Operations Approved 170r---~~~ __~------------~____~__~~~~~ 160 70 60 50 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 Fiscal Year not. The United Arab Emirates, Graduation from the IBRD with a per capita gross national and IDA has occurred for many product of more than $30,000, is a years. Of the thirty-four very poor member; so is Bhutan, which has a countries that borrowed money per capita GNP of only $180. from IDA in the earliest years, twenty-seven have attained suffi The Graduation Process cient economic strength for them to In making loans to developing need IDA money no longer. Of the countries, the Bank does not com twenty-seven, two-Colombia and pete with other sources offinance. It the Republic of Korea-have not is enjoined to assist only those proj only moved from reliance on IDA ects for which the capital required is credits, but have attained sufficient not available from other sources on economic strength to be able to reasonable terms . Through its contribute to IDA. Similarly, about work, the Bank seeks to strengthen twenty countries that formerly bor the economies of borrowing na rowed money from the IBRD no tions so that they can graduate from longer need to do so. An outstand reliance on Bank resources and ing example is Japan. For a period meet their financial needs, on terms of fourteen years, it borrowed from they can afford, direct from conven the IBRD. Now, the IBRD borrows tional sources ofcapital. large sums in Japan. 8 Funds tor the "bullet" train , which runs between Tokyo and Osaka , were lent to Japan by the IBRD. From 1953 to 1966, Japan borrowed more than $800 million in IBRD tunds. This graduation process is an ments more and more from com important index of the progress mercial sources and from IFC. made by borrowing countries since the IBRD and IDA were estab IFC's Complementary Role lished. A substantial number of IFC complements the work of countries have moved from being the Bank in a number of ways. It is IDA borrowers to becoming IBRD active in areas of business where it borrowers. Similarly, many others is impractical for the Bank to oper which once were IBRD borrowers ate. It can offer kinds of financial are now significant sources offunds assistance that are unavailable from for both the IBRD and IDA. Some the Bank-equity, convertible de countries which no longer rely on bentures, underwritings, and stand the IBRD's money continue to seek by commitments. Unlike the Bank, its technical assistance. Several oth it makes loans without a govern ers mobilize their financial require ment guarantee; in fact, it may not 9 accept a government guarantee. preferable. IFC's immediate con Harvesting timber for use in East Africa's first The Bank and IFe have jointly cern is to assist in raising funds integrated pulp and financed a number of projects. Of needed by in vestors, often in con paper mill. The mill was established in Kenya ten enterprises assisted by IFe have junction with governments, to un with financing by African been made possible by, or have dertake promising projects that and Indian investors, depended on, infrastructure proj IFe, and an international have been held back by inadequate group of banks. ects supported by the Bank. The financing. In addition to its own IBRD has been the major source of loan and equity financing, IFe IFC's borrowings. IFe benefits helps investors mobilize resources from the Bank's economic work. from others through syndications While IFe is an integral partof and by encouraging parallel financ the development efforts led by the ing. IFe provides several kinds of World Bank, its special role is to technical assistance-for specific help mobilize resources on com projects, for the development of mercial terms for business ventures capital markets, and for other pur and financial institutions where a poses. market-oriented approach is not In recent years, there has been only applicable but economically a rapid expansion in IFC's activi- 10 ties, made possible by a capital important role in promoting the increase in 1978. The number of flow of private foreign investment IFe investments has been growing to developing countries. With the by more than 10 percent a year on increase in their activities, and in the average. Moreover, special at the cofinancing of projects, the role tention is being paid to the smaller has expanded. New ways are being and poorer developing countries, explored to stimulate the expan where about one-half of IFC's sion. In order to promote the flow investments are now being made. of direct foreign investment, for Both IFe and the Bank play an instance, the Bank is examining the need for a multilateral invest ment insurance agency (MilA). A number of regional and national IFC: Cumulative schemes for investment insurance Number of Projects Projects Approved already exist. In most cases, they work effectively. But they cover 600 only a small portion of the total direct foreign investment flowing to 500 developing countries. An MilA could conceivably complement 400 those schemes and thus help stimu late the flow. 300 Ownership and Direction 200 The IBRD, IDA, and IFe are owned and directed by their mem 100 ber countries. Although each of the three institutions has its distinctive Amounl Invesled features, the IBRD's ownership (US$ Millions) structure is broadly illustrative of the pattern. In the IBRD, each country sub 4,000 scribes to shares in an amount based roughly on its relative eco nomic strength. Each has 250 votes 3,000 plus one vote for each share ofstock it holds, thus increasing the relative 2,000 voting powers of the poorer coun tries. For example, Malawi has sub scribed $16.4 million, or 0.04 per 1,000 cent of the total, while its voting power is 0.09 percent. The United States of America, the Bank's larg 1978 1979 1980 1981 1982 est shareholder, which provides Fiscal Year 22.4 percent of the subscribed capi 11 The plenary session at a recent Annual Meeting of the Board 01 Governors of the Bank and IFC in Washington, D.C. The Bank's Annual Meeting is held joinlly with the International Monetary Fund. 12 tal, has 20.6 percent of the voting the governors representing the power. other members. Each Executive Di Direction in the IBRD is exer rector has an Alternate. cised through a Board of Gover All votes of an elected Execu nors, consisting ofone governor for tive Director are cast as a unit. In each member country, and twenty practice, most decisions are made one full-time Executive Directors. through consensus, rather than by The governors meet once a year to formal vote. Although the Execu review operations and basic poli tive Directors have to approve all cies. Most functions of the gover loans, only the management of the nors are delegated to the Executive institution can propose that a loan Directors, who normally meet at be made. The Executive Directors least once a week at the Bank's are responsible for all matters of headquarters in Washington. Five policy. They meet under the chair of the Executive Directors are ap manship of the President. They pointed by the largest stockholders select him, and he is responsible for (the United States of America, the the conduct of the Bank's business United Kingdom, France, the Fed and for its organization and staff eral Republic of Germany, and Ja under the direction ofthe Executive pan), while sixteen are elected by Directors. Executive Directors and their Alternates and senior officials ot the Bank in the Board room . 13 The poorest people in developing countries need not be doomed to a liletime 01 hunger and unemployment. They are being helped directly, notably through Bank lending tor agriculture and rural development, small-scale enterprises, and urban development. 14 Types of Projects Assisted During the first two decades of its World Bank Lending by Region (US$ Billions) existence, two-thirds of the assis tance provided by the Bank was for electric power and transportation projects. Although such infrastruc ture projects remain important, the Bank has diversified its activities in recent years as it has gained experi ence and acquired new insights into the development process. The Bank is now giving parti cular attention to projects that can directly benefit the poorest people in developing countries by helping them to raise their productivity and to gain access to such necessities as safe water and waste-disposal facili ties, health care, family-planning assistance, nutrition, education, and housing. The direct involvement of the poorest in economic activity is being promoted through lending for agriculture and rural development, small-scale enterprises, and urban development. Within the tradi- An agricultural extension agent (left) in northeast Thailand gives advice on growing corn. One extension approach, the training and visit system, has been introduced in a number of Bank -assisted proiects. It aims at increasing the incomes, mainly of smallholders , through the use of simple techniques of better crop husbandry. 15 tional sectors also, there have been World Bank Lending, by Sector changes. In transportation proj Fiscal Year 1982 (US$ Millions) ects, greater attention is given to constructing farrn-to-market roads. Power projects increasingly provide lighting and power for villages and small farms. Industrial projects place greater emphasis on creating jobs in small enterprises. Labor intensive construction is used where practical. Agriculture and Rural Development In recent years, the largest share of Bank lending has gone to help finance agriculture and rural development projects. That em phasis is being maintained: About 25 percent of total investments by the Bank are directed to this sector. The reasons are compelling. Approximately six out of every ten people in developing countries de pend on agriculture and related pur- An Indian child receives cash payment for milk. IDA has supporled the development of dairy cooperatives in India. Beneficiaries are, in the main, poor villagers. 16 suits for their livelihood. Equally world live in the rural areas. The important, agricultural production rural development projects sup is a key factor in the development of ported by the Bank are designed to most countries. In the poorest be of particular benefit to them. countries, it is critical. Food re The Bank's extensive experi quirements in the developing coun ence with agriculture and rural de tries will increase rapidly over the velopment projects has provided it years ahead as populations grow with the technical skills to help and incomes improve. Most of the developing countries expand irri poorest people in the developing gation, provide more effective ex- Workers building a distributory canal that lorms part 01 the Rajasthan canal project in India. Irrigation features prominently in the Bank's assistance lor agriculture and rural development. 17 tension services, make credit easier Energy to get, adapt technology, increase storage capacity, and improve mar The Bank's lending for energy keting and distribution facilities. has risen sharply since the mid Agricultural projects have had ex I 970s. It now represents a quarter cellent rates of return. They have of total lending. Energy is clearly increased food supplies. By helping essential to development, and be to raise exports or cut imports, comes increasingly so as economies they have enabled several coun expand. With the large rise in en tries to improve their balance of ergy prices over the past decade, the payments. benefits of conserving energy and Much of the Bank's assistance for agriculture aims at increasing the productivity of smallholders. This photo from Kenya shows such a farmer standing in the midst of his pyrethrum crop. Pyrethrum 's dried, powdered flowers are used commercially as an insecticide. 18 developing domestic energy re In developing oil and gas re sources have become greater than sources, the Bank is an important ever. But energy development re catalyst. It helps to develop data quires large-scale investments. which countries can use to attract Nearly two-thirds ofthe Bank's private investment for exploration energy program is in electric power. and development. It assists in At today's energy prices, there is financing the infrastructure neces still an immense and untapped sary for the development of oil and hydroelectric potential in many de gas fields. It advises on appropriate veloping countries. There is also incentive structures. And, together . substantial potential for the devel with IFC, it provides seed money opment of coal resources. This will and helps to arrange the financing require large-scale investments in required. The developm~nf 01 infrastructure as well as mines. For By participating in agreements foreslry resources is an important Bank activity ests are another important source of between host governments and Notable progress has energy. Investments are needed in private corporations, the Bank can been made in increasing give both parties to the agreement supplies of firewood for conservation and reforestation to domestic use in Mali renew the world's rapidly dwin an increased sense of security re and many other nafions. dling sources of firewood. garding the fairness and stability of A worker at a hydroelectric plant in Honduras. at the more than $20 billion lent tor energy wortdwide, a large proportion has been for the development of electric power. The proportion has dropped in recenl years as fhe Bank has begun to help develop oil and gas resources. 19 the terms. It can thus make invest to universities and teacher-training ment in exploration more attrac colleges. Primary and nonformal tive. IFC has been increasing its basic education, including literacy activities in support of private programs, have received increasing enterprises in the energy sector. support in recent years. Experimen- It has helped expand conventional sources as well as relatively new sources, such as manufacture of A ship laying down a natural gas pipeline in India's ethanol from various raw materials. Bombay High oil and gas field. In recent years, over $1.5 billion has been committed by the Bank for oil and gas Education development projects. The Bank's first loan for an A project to devetop an education project was made in existing oil field and 1962. Since then, it has expanded explore other promising sites in Colombia is both the volume of its education being implemented with lending and the range of activities assistance from IFC. assisted. The Bank has helped to build or improve a wide variety of institutions, from primary schools A student at work in a welding workshop at the Vocational Training Institute in Pusan, Republic of Korea . The Bank supports three forms of training: general pre employment fraining for the labor market, project-related training, and training for the rural and urban sectors within urban or rural development projects. 20 tal and innovative educational pro materials, and equipment. Much grams have been financed on a pilot help has been given to improve the basis, in order that cheaper and planning, administration, manage better alternatives might be found. ment, and evaluation of education The Bank has supported proj programs. Although education ac ects for nonformal vocational and counts for a relatively small portion agricultural training. Assistance has of total lending, the Bank is now been provided for curriculum de one of the largest providers ofassis velopment; educational radio and tance for educational development television; mobile educational and training. Investment in people units; educational studies; school is of key importance in developing mapping; and the production and countries. It yields high returns for distribution of textbooks, learning long-term economic development. Children playing in Iront ot their whitewashed schoolhouse in rural Ecuador Bank assistance for education is extended to many types of institutions; in recent years. the proportion going for primary and nonformal basic education has become significant. 21 Transportation and improvement of all major The Bank's lending for trans modes of transport. portation has continued to increase Most important since the mid even though it accounts today for ~ 1960s has been lending for roads smaller proportion of total lending and highways. Hundreds of thou than in years past. Assistance has sands of kilometers of main, sec been provided for the expansion ondary, feeder, and rural access roads have been built. Hundreds of thousands of kilometers more have been improved. Lending for railways, which was dominant in the 1950s, has remained important. Financing has been provided for improving rail way track, purchasing locomotives and rolling stock, modernizing sig naling and communications sys tems, and creating supporting facili ties for maintenance and opera tions. Lending for ports and shipping has encompassed construction and expansion of seaports and river ports, improvement of inland A commuter train in the Nile delta area of Egypt. Next to roads, most of the assistance provided by the Bank for waterways and port-access chan the development of transportation has been for railways. nels, and procurement of vessels, A scene Irom the port 01 Dakar (Senegal). Once countries have built basic infrastructure, such as transportalion and power facilities, their prospecls lor agricultural and industrial developmenl and lor attracting foreign investment are greatly improved. Infrastructure projects generally yield high rales of return. 22 principally for port operations or areas. Apart from aiding agricul for transport among islands or ture, improved transport provides through inland waterways. A lesser people with better access to health number of loans has been made for and educational services. It also projects relating to domestic or in pennits broader contacts, so that ternational airports. people find it easier, for instance, to The opportunities that im get jobs. In addition, the Bank has proved transport offers to the poor sponsored extensive research on have been increasingly recognized. various aspects of civil construc A rural road in Lesolho If an area's agricultural production tion, particularly the scope for being buill by labor is to expand substantially, it is al greater use of labor. Bank-assisted inlensive melhods specially adopled most always necessary to improve projects reflecting this research under lhe projecl. transport so that crops as well as have increased employment oppor More lhan half of all Bank lending for inputs, such as fertilizer, can be tunities and stimulated develop lransporlalion has moved in time. Most of the roads ment of local construction enter been for road mainlenance and now being built with the Bank's prises while improving transport assistance are in poor, mainly rural, systems. 23 Telecomm unications Industry and Mining Telecommunications playa vi The Bank's direct lending for tal role in commerce and support industry-as distinct from its lend the efficient use of transport net ing through development finance works. They are becoming more companies-has been largely con important as energy prices make fined to assisting large-scale under physical movement more costly takings. Whether a project is in the and technological progress makes public or private sector, the Bank telecommunications less expen seeks to ensure that it operates SIve. efficiently. The Bank tries to relate Although the Bank provides industrial projects to the ancillary A tetephone worker in relatively modest amounts, it is the installations that may be required. the Philippines. The Bank has supported main source of multilateral finan For instance, logging roads and re telecommunications cial assistance for telecommunica forestation schemes may be finan projects in more than forty countries. The tions development. In supporting ced in addition to the construction projects underline the telecommunications projects, it has of a pulp and paper mill. Highways vital importance of telecommunications to sought to strengthen national com and port facilities may be devel economic and social munications systems, improve oped to supply an industrial facility development urban and rural telephone net or give it economical access to works, and expand the number and markets. capacity of international links. In The Bank has supported proj creasing attention has been given to ects in most of the basic industrial the spread of telecommunication sectors such as steel, cement, tex services to rural areas and to the tiles, chemicals, fertilizers, and poorer parts oftowns. mining-wherever the country has At work in a steel mill near Sao Paulo, in Brazil. The Bank's direct lending for industry-as distinct from its lending through development finance companies-has largely been confined to assisting large-scale undertakings. 24 In recent years, as fertilizer indus tries in some countries have be come more mature, it has increased lending for rehabilitation, and for removing impediments to efficient production, so that capacity can be used more fully. Chemical and synthetic-fuels projects, particularly those de signed to produce energy economi cally from domestic resources such as coal, natural gas, and biomass, are becoming an important area of direct lending by the Bank. It is now also actively considering lending IFe helped to establish for industrial retrofitting in a num Ihis Thai glass botlle manufacturing company, ber of countries so that energy can which can produce be used more efficiently in energy 30,000 metric tons a year of beverage and intensive industries such as fertiliz pharmaceutical ers, refineries, steel, cement, and containers to meet rising domestic demand. pulp and paper. The Bank has pro vided assistance for projects relat ing to nonfuel minerals such as copper, iron, and aluminum. It has often helped countries work out satisfactory arrangements with in ternational mining concerns. The largest part of IFC's investments has been in manufac Pouring molten alumir:lum into molds at an aluminum turing and mining. Many types of plant in Ghana. Whether an industriat project is in the public or private sector, the Bank seeks to ensure manufacturing projects have been efficient use of capacity. assisted. A number have been in basic industries such as cement and construction materials, iron, steel, chemicals, petrochemicals, fertiliz a competitive advantage. The proj ers, and pulp and paper. Other ect may be for import substitution projects have been for the produc or it may produce goods that are tion of consumer goods such as exported. The largest share ofdirect processed food, textiles, shoes, ve industrial lending has been for fer hicles and automotive products, tilizer production and distribution and glass containers. IFC has as projects, primarily to meet the in sisted projects in mining and proc creasing domestic demand in devel essing such minerals as bauxite, oping countries. In the past, the chromite, cobalt, copper, magne Bank financed mostly new projects. site, nickel, and silver. 25 Development Finance Companies Whereas assistance to large scale industrial projects is provided directly through Bank loans, sup port for medium-sized and small scale productive enterprises now running at more than $1 bil lion per year-is largly channeled through local development finance companies (DFCs). Some are pri vately controlled, some govern ment owned. DFCs are financial institutions whose major activity is to mobilize medium-term and long term resources to finance invest ment projects of productive enter prises. Most DFCs lend to manu facturing enterprises, though some also specialize in particular sectors or activities, such as agroindustries, tourism, and small-scale enterprise. In the past few years, the Bank has sought to increase the flow of financial and technical assistance to small enterprises. These enterprises are vital for ensuring balanced industrial growth, expanding em ployment, and forging links among the various subsectors of manufac turing activity in a country. They often generate more jobs per unit of investment than do large firms. They often also create substantial indirect employment, which helps the urban and nonfarm rural poor. And they are a source of entrepre neurial initiative. While common in most devel oping countries, small-scale enter prises (those with assets ofless than One of three experimental windmills on Lake Victoria that supply energy to nearby villages. The windmill was $250,000) generally find it more manufactured by a small-scale metalworks factory that difficult to raise capital than do has been assisted by Kenya Industrial Estates, the beneficiary of an IDA credit. Kenya Industrial Estates is a larger enterprises. The Bank uses government-owned company established to develop DFCs to help small enterprises, but small-scale industrial enterprises in the country. 26 Applying the last touches to lanterns manulactured in Indonesia. Small enterprises ollen generate more jobs per unit 01 investment than do large hrms. it also looks to a wider range of sometimes complement the Bank's institutions such as commercial involvement in that the Corpora banks, investment companies, and tion invests in equity to provide a cooperatives to promote their base for the DFC to borrow World development. IFC's investments in Bank funds. In other cases, IFC development finance companies makes its own direct loans to DFCs. 27 Urban Development Over the past twenty-five years, the urban population of de veloping countries has increased at the unprecedented rate of about 4 percent a year-nearly twice the rate of the overall population growth ofthese countries. Over 640 million people have been absorbed by the towns and cities in the devel oping world in a single generation. These urban areas now contain over 900 million people, or nearly one third of the total population. The Bank estimates that almost one third of the urban dwellers in the developing countries currently do not earn enough to be able to buy the basic necessities they require to maintain a fully productive life. Slum·upgrading projecls are intended to improve housing Over 250 million lack reasonable by providing residents secure land tenure and beller access to credit lor conslruction . lihe photo is 01 a access to minimal nutrition, safe young girl in Tondo, a now·upgraded area 01 Manila. water, minimal sanitation, basic ed ucation, and shelter. The Bank's approach to urban poverty has two complementary alms: of critical importance in selecting · to create productive employ new sites. In such projects, the em ment opportunities; and phasis is on self-help; finance is · to develop programs to de supplied only for those basic ser liver basic services to the vices that people cannot provide for urban poor on a large scale, themselves. Even so, eventual re at standards they and the covery of costs is considered essen economy can afford. tial so as to permit this type of The Bank emphasizes low cap project to be repeated in many ital investment per job and inex needy urban locations. pensive services so that the largest A similar focus on the urban possible number of the poor in poor is found in urban transport urban areas can benefit. projects. In such projects, a major Urban projects usually contain aim is to enable cities to make more as major components the upgrading efficient use oftheir transport facili of slums and squatter settlements ties. This could mean expanding or the creation of serviced sites for the fleet of buses. It could mean additional low-income housing. making better use of roads and Access to centers of employment is streets, or of signalling arrange 28 ments, so that traffic flows more Pupils in a primary school located in a slum in Calcutta. Experience with urban development has pointed to the smoothly. An important objective benefits of coordinating investments across is to provide cheap transport that sectors-shelter. infrastructure. solid-waste management. health. nutrition. and education. would enable poor people to travel easily between their homes and their workplaces. Some urban proj ects provide support for the overall The Bank's lending for water development programs of cities supply and sanitation has broad such as that of the Calcutta Metro ened greatly since it started in 1963. politan Development Authority. At first, it was concentrated in ma jor cities. But subsequently it has Water Supply and Sewerage encompassed smaller cities, towns, Inadequate water supplies and and villages. Services to the poor the lack of decent sewage facilities have been partially financed from are major causes ofdisease in devel tariffs collected from the well-to-do oping countries. The poor suffer or, in the case of rural areas, with most from waterborne diseases general tax revenues. especially the women, infants, and A particular effort has been children among them. They not made to include the poorest parts of only lack access to safe water and towns and cities within the scope of sanitation facilities; they are also the projects the Bank has assisted. more vulnerable to disease because Rural areas, too, have been aided, of undernutrition, poor personal not only by numerous water and hygiene, and inadequate preventive sanitation components in rural de health care. velopment projects, but also by 29 loans for broader national or re Population, Health, and gional water and sanitation pro Nutrition grams. To permit governments and Efforts to raise living standards enterprises to provide services to as in much of the deve'loping world many needy people as possible, the have been seriously undermined by Bank has placed great importance rapid population growth. With av on the use of inexpensive technol erage annual population growth ogy in delivering water supply and rates ofalmost 3 percent in much of sanitation services. Africa and Latin America, for ex ample, governments will need to The Bank has helped to build water supply and double their spending within sewerage facilities in both rural and urban areas. The twenty-three years just to maintain scenes shown here are from Calcutta and Lilongwe (Malawi) . There is a strong relationship between clean current levels of social-service cov water, sanitation, and health. Waterborne diseases are erage. Slower population growth the leading cause of infant mortality worldwide and are among the most serious of the diseases occurring in the would make available more re developing world . sources per person for such basic 30 services as health, education, wa A mother and child at a Dhaka (Bangladesh) family planning clinic. The importance of supplying safe, cheap, ter, sanitation, and housing. Fertil and effective family-planning services is now well ity, health, and nutrition are closely recognized; family planning is no longer seen as a mere adjunct of medical care. related to one another-and to edu cation. With lower fertility, the spread and quality of education increase-because both the state and parents can afford to spend more on each child when there are fewer of them. Large families have higher in fant and child death rates and a higher incidence of malnutrition -there is simply less food, money, and time for each child. As the chance of survival of children increases, the desire to have more children diminishes. The Bank be gan lending for population plan ning in 1970. Typically, it has sup ported projects to encourage family planning, make contraceptives more easily available, and provide better prenatal, postnatal, and baby care. Health and nutrition compo nents have for several years been included in many Bank-supported projects, principally in the sectors of population, water supply, and rural and urban development. Nutrition projects have been assisted in Brazil, Colombia, India, and Indonesia. The Bank has de signed projects specifically in tended to improve health facilities. In such projects, the emphasis is on preventive medicine and measures to improve-at relatively low cost-the availability of primary health care to the very poor. The Bank is helping countries to de velop projects that would meet needs in all three sectors-popula tion, health, and nutrition-in an integrated fashion. 31 Nonproject Lending restore normal development activities. Under its Articles of Agree · The need to import supplies ment, the Bank is required to lend or equipment so that existing for specific projects, except in spe production capacity can be cial circumstances. In practice, used more fully. nonproject lending has been used in · A sudden fall in export earn four types of "special circum ings in an economy that is stances"; critically dependent on a sin · A need for the reconstruction gle item ofexport. or rehabilitation of an econ · A sharp deterioration in omy after a calamity like terms of trade because of a war, earthquake, or flood, rapid rise in import prices. where a quick transfer of ex In recent years, the Bank has ternal resources is needed to expanded the scope of its nonproj- The IBRD's first loan, approved on May 9, 1947, was extended to the Credit National, a semi-public French corporation created in 1919 to assist in financing reconstruction ar:ld development of the French economy after World War I. The IBRD approved reconstruction loans after World War II to four countries of Western Europe: Denmark, France, Luxembourg, and the Netherlands. The scene in the photo is of a bombed-out section of Marseilles. 32 IBRD and IDA Cumulative Lending, by Sector, June 1946 to June 30, 1982' Expressed In United States dollars (In minions) Total SAD DA IBRDand Total Total lOA A scene Irom Turkey's lertile Adana plain. ABRICULTURE /tUJ RURAL Turkey has received DEVElOPMENT "structural adjustment " AQriGuIIurIII credit S 2.278.9 S 1.766.0 S 4.043.9 loans trom the IBRD. AgrIQUIIunI sector loin 86.2 237.0 322.2 ~ 1.016 5 632.6 1,649.1 "* dMiIopnIent FithIffea 4.071 .4 146.4 1.683.5 141.1 5.754.8 287.5 FcxuIry 3110.0 · .7 738.7 ",1rId dr.nge 5.462.5 3.548 0 9.010.5 t.MiitoCfc 1,2115.4 518.9 1.1104.3 PtinIMIII crape.. 1,1962 5IM.1 1.780.3 Aelelicti.1rId exIenIian ~ · .0 1.126.3 ToW! I!J.HY l...UMA! S 28,515.7 DEWLOPMENT fIW.ICE CClMPANES ·. $ 7 _.7 $ 629.8 S 8,815.5 EDUCATION S 2.801 4 S 1.519 7 4.421 .1 ENERGY 01. gil. IrId COlI . S 2.161.4 S 298.7 S 2.481 1 ~ ~ ~ 17.751.8 ToW fl!.II:r ~ S 20212.7 S 21 .0 S - $ 21.0 1,888.3 1.557.8 181' 18.1 2..,.. 1.578.5 1,223.5 1.2t&S 3G.O SW 7843 3582 5l&' 32.0 · .0 Ii , . , l,. . . . 1.1M S 4.285.8 · 2,8118:t S 7.201.1 2Ii2:3 · 307. t _4 · t_t.o S 210.5' 1.341.& 115.9 S 236.7 352.8 $1· ·' · 88U $ 2.581.3 · 3IlIS .71 480.3 ect lending to include "structural adjustment" loans. These are intended to help developing coun tries adjust their economic policies and structures in the face ofserious balance-of-payments problems that threaten continued development. The main objective of "structural adjustment" lending is to facilitate the restructuring of a developing country's economy so as to put its current-account deficit on a sus tainable basis within three to five years. The loans support programs that are intended to anticipate and avert economic crises through eco nomic reforms and changes in investment priorities. 33 34 The Project Cycle The Bank provides most of its the need for its assistance. financial and technical assistance to More detailed studies are often developing countries by lending focused on particular sectors or sub money for specific projects_ Al sectors of an economy or on impor though IBRD loans and IDA cred tant cross-sectoral issues such as its are made on different financial urban migration, employment, tax terms, the project criteria applied ation, and trade policies. Together, by the two institutions are identical; these studies enable the Bank to the same high standards are used in conduct a dialogue with the country assessing the soundness of projects. about important development is The decision whether a project will sues, the kind ofassistance the Bank receive IBRD or IDA financing will provide, and its objectives. depends on the economic condition The "life cycle" of a Bank of the country, and not on the assisted project usually consists of characteristics of the project. (IFC's six stages: identification, prepara project cycle is different from the tion, appraisal, negotiation and ap Bank's.) proval, implementation and super The Bank begins its opera vision, and ex post evaluation. The tional cycle by studying the econ intensity ofthe Bank's involvement omy of a country and the needs of varies at each stage. Typically, the the sectors in which lending is con time the Bank takes to process a templated. These analyses provide project is as follows: the framework for formulating an appropriate long-term, develop Time elapsed Staff- ment-assistance strategy for the Project stage (months) months economy as a whole and for some of the major sectors. Identification, selection, A key role is played by "coun preparation, and try economic missions." A country design 16 IO economic mission consists of a Appraisal, group of experts that visits a bor negotiation with rowing country to collect and ana borrower, and lyze information, review policy is approval by Bank's Executive Directors 11 18 sues, formulate the Bank's views, and discuss with the government its development programs and poli On the average, over 80 percent A Bank-assisted tivestock devetopment cies. The economic report prepared of the Bank's funds for a project are project in Syria tocuses by the mission generally provides disbursed within six years. Approxi on improving sheep the basis for the Bank's strategy for mately twenty-three staffmonths are husbandry. A project's "tife cycte" has six assistance to the country: the size, devoted to supervising the imple stages identification, terms,and purposes of its lending mentation of a project. The ex post preparation, appraisat, negotiation and programs, and the sectors and areas evaluation is usually done within six approval, to which lending will be directed to eight months after the project is implementation a(ld supervision, and ex post considering the activities of other completed, and requires about 2.5 evalualion. donors, the Bank's capabilities, and staffmonths. 35 Identifying Projects quacy of natural resources is deter Governments propose projects mined. Marketing aspects are re for financing by the Bank, but in viewed. Training needs are as identifying and selecting projects sessed. Social, administrative, and they often receive assistance from environmental implications are ex the Bank' s "identification mis amined. sions." Sometimes a Bank mission It is vital in project preparation supervising an earlier project will to identify and compare the major suggest a new project to the same technical and institutional alterna entity or in the same sector. Some tives in light of their costs and projects may be identified through benefits. Should oxen or tractors be the work of other U .N. agencies. used for crop cultivation-given, Some are brought forward by pri for example, the costs of fuel and vate sponsors, such as mining en capital, average farm size , and terprises seeking to develop new maintenance capabilities? Should resources. At times, a series ofproj slums be upgraded, or new housing ects is contemplated at the outset, built? The preparation work usu and each provides financing for the ally requires feasibility studies fol preparation of successor projects. lowed by more detailed studies of Before the Bank agrees to get in those alternatives promising to volved in preparation work , all yield the most satisfactory solu project proposals, from whatever tions. source, must meet aprimajacietest of feasibility. Appraisal The studies made under the Preparation borrower's direction during the Once a project has been identi project preparation period are care fied, it has to be designed. The fully reviewed by the Bank during design work encompasses the tech the project appraisal stage. Ap nical, managerial, economic, and praisal is solely the Bank's responsi financial dimensions of the pro bility. Its purpose is to examine the posed project. The borrower is pri economic need that the project is marily responsible for the prepara designed to meet; judge whether tion of the project, but Bank staff, the project is likely to meet this U.N. agency personnel, and outside need efficiently; determine what fea consultants frequently playa major tures and conditions will be neces role. The Bank often helps finance sary to ensure successful implemen project preparation work. tation; and, at the end, provide a The preparation of a project basis for the Bank's decision can take a long time, sometimes whether to support the project. several years. This is the stage at The appraisal includes a visit which, for example, soil, hydro by a team of Bank experts to the graphic, and hydrological investiga country, typically lasting for three tions are undertaken and the ade to five weeks. Like the preparation 36 work, the appraisal mission exam In making a financial apprais ines the project from four points of al, the Bank closely examines the view-technical, economic, finan borrower's financial plan. The pur cial, and institutional. That exami pose is to ensure that adequate nation is subsequently continued at funds will be available to cover the length at the Bank's headquarters in borrower's share of project costs Washington, D.C. and that after the project has been The appraisal team assures it completed, sufficient funds will be self that the various design alterna provided to operate and maintain tives have been identified and ade the facility properly. The arrange quately considered, and that the ments made to recover the costs of best technical solutions for the the project from its beneficiaries, country have been found. It reviews and the impact of the project on the the engineering and behavioral as government's budget are also as sumptions, cost estimates, the ap sessed. This involves such ques propriateness of the standards be tions as: What incentives need to be ing applied to the situation of the provided to beneficiaries to get country (for example, in relation to them to participate in the project? housing, or school curricula, or the To what extent can the country quality ofa road), and the proposed undertake similar projects so that methods of, and schedule for, im the benefits might be spread more plementation. widely? The mission examines the eco In appraising the institutional nomic justification of the project aspects, the Bank examines the bor and calculates an expected eco rowing entity, its organization, nomic rate of return to the country management, staffing, policies, and in all cases where it is appropriate. procedures. It takes into account In doing so, it evaluates the demand the wide array of government poli for the goods and services the proj cies and procedures that affect the ect will provide and the benefits and circumstances in which the entity costs of providing them. It consid operates. Often, the Bank advises ers who will receive the benefits and on those institutional or policy bear the costs, as well as such factors changes that might facilitate the as the impact of the project on project's implementation or permit employment, on the fiscal situa the country's broader objectives in tion, and on the country's balance the sector to be achieved. Such of payments. Usually, the likely changes could include, for example, behavior of the beneficiaries is of reorganization of an entity; greater key importance. It is necessary, decentralization of authority; crea therefore, to answer questions such tion of special training programs; as: Will the pure water become improvements in systems for plan contaminated after it is provided? ning, monitoring, financial man Will farmers permit their children agement, and evaluation; or to attend secondary school? Will changes in cost recovery or pricing they go into debt to buy fertilizer? policies. 37 The Bank reviews all prospec implemented and achieves the ob tive projects to determine whether jectives for which the loan was they are likely to lead to environ made. Particular attention is paid to mental problems. In more than the technical skills and managerial three out of five projects, no such capabilities of the institutions im problems are considered likely. For plementing the project. The bor the rest, project designs are modi rower is asked to submit periodic fied or, less often, environmental reports on the progress of imple safeguards are incorporated as a mentation. The Bank, in tum, regu condition of Bank lending. The effi larly sends "supervision" missions cacy ofsuch measures is then moni to ensure that the funds for the tored for the life of the project. project are spent in the manner agreed upon. Normally, the Bank Negotiation and Approval will not disburse its funds until it has received evidence that the bor Once the appraisal has been rower has spent the money to completed, formal loan negotia achieve the agreed purposes. The tions can begin. These result in a borrower is responsible for procure binding agreement between the ment under the project, but the Bank and the borrower which pre borrower's actions are subject to cisely defines the project and speci review by the Bank. In most cases, fies the actions that must be taken the Bank requires the borrower to to achieve its objectives. The agree obtain goods and works through ment usually contains a schedule of international competitive bidding implementation and covenants on open to suppliers and contractors in such matters as anticipated rates all of its member countries, plus of return, revenue levels, organi Switzerland. Supervision missions zational changes, and land acqui help solve any problems that may sition. have arisen. These problems may After the negotiations are com be technical or administrative in pleted, a report on the proposed nature or they may arise from loan is submitted to the Executive changes in circumstances, cost Directors, along with the "appraisal increases, or even the vagaries of report" and the legal documents. the weather. During implementa The Bank cannot make a loan for a tion, the Bank and the country may project without the approval of the agree to modify some aspects ofthe Executive Directors. project. In "supervising" projects, the Implementation and Bank seeks to act as a partner of the Supervision borrower. Problems are treated as The borrower is responsible for matters ofjoint concern. The Bank implementing the project. As a routinely shares with the borrower development institution, however, its experience with similar projects the Bank has a responsibility to in other countries. Project supervi ensure that the project is effectively sion has proved to be one of the 38 US$ Billions World Bank Disbursements 7 197319741975 1976 1977 1978 1979 1980 1981 1982 Fiscal Year most effective ways in which the 1977, published the Operations Bank can provide technical assis Evaluation Department's "Annual tance to member countries. Review of Project Performance Au dit Results." While these reviews Evaluation of Projects have revealed that the costs of A notable feature ofthe Bank's many projects rose beyond expecta work is its system of independently tions as a result of inflation and evaluating the results of projects exchange-rate movements and that after the loan has been fully dis many projects were modified dur bursed. Comparing actual experi ing implementation or took longer ence with what had been expected to complete than planned, they before the project was launched have also demonstrated that most has become an essential part of projects-more than 90 percent of the Bank's own process of learning the investments examined-were how to make development assis clearly worthwhile in terms oftheir tance more effective; it has also major objectives. The great major become an important aspect of the ity of the projects for which eco Bank's accountability to member nomic rates of return had been countries. calculated at the time of their ap To help disseminate the princi praisal continued to show rates of pal lessons learned from the evalua return that were satisfactory at the tion system, the Bank has, since time of evaluation. 39 Retrospective analysis of proj on the assessment of sociocultural ect experience has already contrib factors. In many cases, the results uted much to a better understand have underlined the need for mea ing of the various factors influenc sures to enhance the effectiveness of ing the success of Bank-assisted institutions, the importance ofproj projects. Project evaluation results ect-related training, and the useful have encouraged the Bank, for ex ness of building monitoring and ample, to place greater emphasis evaluation systems into the design during preparation and appraisal of projects. Storing sorghum in Upper Voila . Apart Irom building storage capacity, this IDA project aimed at a balanced devetopment of lood crops and cash crops. It attracted cofinancing funds from Canada, Switzerland, and the African Development Fund. 40 Cofinancing projects or programs in developing Bank-assisted projects that countries. The three main catego also receive financial support from ries ofcofinancing partners with the other institutions are said to be Bank are: "cofinanced." Cofinancing, one of · Official sources, which in the most important ways in which clude governments, their flows ofassistance can be increased, agencies, and other multilat directly associates the Bank's funds eral financial institutions. with those provided by other · Export-credit institutions, sources in implementing specific which are directly associated A view 01 the Patlani dam in Thailand . This hydroelectric project was assisted by an IBAD loan and cofinancing Irom private Japanese sources. 41 with financing the procure project supervision, implementa ment of certain goods and tion, or engineering. Most of that services fJom a particular more than $1 billion was included country. as components of projects in other · Commercial banks and other sectors. But a substantial amount private financial institutions. -$72.5 million-was accounted The Bank's cofinancing opera for by eleven projects that were tions have risen steadily during the exclusively for technical assistance. past decade-from thirty-seven in Lending for technical assis fiscal 1973 to ninety-nine in fiscal tance is merely the most visible part 1982. During the same period, the of a total effort that may be more volume of cofinancing has risen important to developing countries from $496 million to $7.4 billion. than the money the Bank provides. Of this $7.4 billion, cofinancing Technical assistance is sometimes with commercial banks and other given when a country asks for ad private financial institutions com vice on questions of general policy, prises $3.3 billion; export-credit planning, or administration. Or it agencies account for about $2 bil may ask for help in meeting specific lion; and the remainder, $2.1 bil needs-the identification and prep lion, comes from official sources. aration of projects, for example, the Forty percent (99 out of247) of the recruitment of key personnel, the projects approved by the World mobilization of domestic capital, or Bank in fiscal 1982 involved some perhaps the improvement of statis cofinancing. The Bank's cofinanc tical services. ing operations with private sources Most needs for technical assis have grown from $84.7 million in tance become apparent in discus fiscal 1974 to a record $3.3 billion in sions between governments and the fiscal 1982. The number of opera Bank. Ifa government asks for such tions has increased from two in assistance, the Bank provides it, 1974 to sixteen in 1982. organizes it, or helps to find it. The Bank provides a large amount of technical assistance by administer Technical Assistance ing feasibility studies financed by Developing countries look the United Nations Development upon the Bank as a source not only Programme (UNDP), many of of finance, but also of technical which lead to Bank-aided projects. assistance. It is possible to measure Like the Bank, IFC provides a few types oftechnical assistance in several kinds of technical assis dollar amouQts. For example, in tance. A substantial part of it is loans and credits extended in fiscal related to specific projects. Thus, as 1982, more than $1 billion was a project is being developed, IFC included to pay for items such as will provide the sponsors with ad technical and feasibility studies, the vice on its various aspects, espe services of experts and consultants, cially on financial planning. If training, and advisory services for asked, it will also advise govern 42 ments on how the private sector's staff college, the Economic Devel contribution to economic develop opment Institute (EDI). EDI was ment can be enhanced. The Bank established in 1955 to provide train and IFC jointly provide technical ing for senior officials ofdeveloping assistance to governments seeking countries to help them improve the to encourage and expand the capital management of their economies markets within their countries in and increase the efficiency of their order to mobilize private financial investment programs. These offi resources. IFC may provide addi cials come from ministries of fi tional assistance by helping to es nance and planning, agencies tablish and finance individual capi dealing with various sectors of de tal markets institutions that fit velopment, and central banks and within a country's overall strategy development finance institutions. for this sector. EDI's primary advantage in the training field is that it is able to Economic Development draw on the working experience, Institute policy analysis, studies ofcompara Another important source of tive development, and otherempir technical assistance is the Bank's ical research of the Bank. Officials Irom developing countries attending a course at the Economic Development Institute. EDI offers training that enables developing countries to improve the management of their economies and increase the efficiency 01 their investment programs. 43 44 The IBRD's Finances When the IBRD opened for busi money. It can only be called from ness in 1946, it had an authorized shareholders for the purpose of capital of$l 0 billion. Over the next meeting the IBRD's debt obliga three-and-a-half decades, there tions in the unlikely case that they were a series of capital increases to cannot be met from the IBRD's pave the way for an expansion in own resources. It cannot be used, membership and in lending activi therefore, to cover administrative ties. Capital increases to allow a expenses or for lending operations. growth in lending became necessary Although the IBRD has never had because, under the Articles of to call subscriptions to capital, it is Agreement, the IBRD cannot allow reassuring to those who invest in its its outstanding loans to exceed the bonds and notes that this large pool total of its subscribed capital, sur of resources is available. plus, and reserves. At the end of fiscal 1982, the Borrowings IBRD had an authorized capital of The rapid expansion of the 716,500 shares, having a value of IBRD's activities has been made roughly $80 billion (in current dol possible by its ability to mobilize lars), reflecting a capital increase large sums of money. More than that became effective in January two-thirds of the amounts invested 1980 that nearly doubled the in the Bank's lending operations are authorized capital. Ofthat amount, raised through borrowing. The over $40 billion had been sub IBRD borrows in many currencies scribed, and $4 billion paid-in. Sub and capital markets throughout the scriptions following the increase in world. Most of what it borrows authorized capital began in October comes from the private capital 1981 and will continue for the next markets. But large sums are bor several years. A country's voting rowed from its member govern power depends directly on the capi ments, too. To avoid depending too tal it subscribes, since each member heavily on a single market, the has 250 votes plus one additional IBRD, since its early days, has tried vote for each share of capital sub to diversify the sources of its funds. scribed. As a result, its borrowings now There isa notable feature ofthe come from individuals and institu IBRD equity capital structure that tions in more than 100 countries in is of importance to its strength in Africa, Asia, Australasia, Europe, the financial markets: Of the sub the Middle East, and North and scribed capital, only a small portion South America. is paid-in by the governments that The IBRD is a major borrower are the IBRD's shareholders and is in the world's capital markets. It is used in the IBRD's operations. The the largest nonresident borrower in Portfolio managers at work in the World remaining and much larger por virtually all countries where its is Bank's trading room tion-the callable capital-is pri sues are sold. When the IBRD first They manage a portfolio worth more than $10 marily for the protection of those borrowed in 1947, the only major billion. from whom the Bank has borrowed market open to it was the United 45 States of America. By 1950, it began governments and their agencies to develop markets for its securities having funds to invest. In the proc in other countries. During the dec ess, the IBRD borrowed in coun ade of the 1950s, it continued to tries that had surpluses in their borrow most of its money in the balance of payments. As the pattern United States of America. But of savings and foreign-exchange the IBRD also raised funds in reserves shifted after the mid Belgium, Canada, the Federal I 960s, there were corresponding Republic of Germany, the Nether shifts in the major sources offunds lands, Switzerland, and the United for the IBRD. Kingdom. The Federal Republic of Ger As world trade and finance many was the principal source in recovered from the effects of war the late 1960s, Japan in the early and expanded, the IBRD pressed in 1970s, and certain members of the the late 1960s and the 1970s to Organization of Petroleum Export establish a substantial and wide ing Countries (OPEC) in 1974. In spread market for its securities out fiscal 1976 and 1977, the IBRD side the United States of Ameri raised most of its funds in the ca-with both the traditional pri United States of America, the Fed vate institutional markets and with eral Republic of Germany, and US$ Millions IBRO's Borrowings 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 900 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 Fiscal Year 46 remarkable. Since 1970 alone, it has IBRO's borrowed, through public issues or Outstanding Borrowings private placements, in Austria, Bel June 30, 1982 gium, Canada, France, the Federal (USS Billions) Republic of Germany, Italy, Japan, United States Lebanon, the Netherlands, Nor Dollars way, Sweden, Switzerland , the 11 .54 United Kingdom, the United Swiss States of America, and Yugoslavia. Francs Among members of the Organiza 5.67 tion of Petroleum Exporting Coun Japanese tries, the IBRD has borrowed from Yen 5.18 Iran, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, Deutsche Mark and Venezuela. OPEC members, 7.27 together with certain other oil Netherlands producing and exporting countries, Guilders have lent the IBRD approximately 1.01 $7.2 billion equivalent, of which Other $4.6 billion remains outstanding. Currencies In many, if not most, coun 1.16 tries, governments have given the ~ 31.83 IBRD freer and fuller access to markets than has been given to other nonresident borrowers. IBRD borrows funds in two main categories of markets: l. It places its bonds and notes directly with governments, their agencies, or central Switzerland. Over the fiscal years banks. These "official 1978 to 1980, most of its borrow placements" include trans ings were in Deutsche mark, Japa actions with governments nese yen, and Swiss francs, reflect and central banks in about ing both the attractiveness of these ninety-five countries, al currencies to investors (because of though there is a concentra the relative strength ofthese curren tion of placements with a cies in the foreign-exchange mar handful ofcentral banks. kets) and their attractiveness to the 2. It borrows in private mar Bank (because oftheir low nominal kets through the medium of interest rates). Since fiscal 1981, the investment-banking firms, United States of America has again merchant banks, or com become a major source of funds. mercial banks. The diversity of the sources The. IBRD's success in raising from which the IBRD borrows is money is based on the market's 47 recognition of its high credit stand IBRD borrowings. This new system ing. Its bonds have been given a is designed to be fair, stable, and, in Triple A rating or its equivalent by the long run, less costly to borrow the principal bond-rating services ers than the previous system. The in the United States of America. new pricing mechanism could sub Outside the United States ofAmer stantially reduce the risk to the ica, sales of IBRD issues are at yield IBRD and its borrowers that occur levels that are comparable to those red under the previous system, in available on government or govern which there was a lag between the ment-guaranteed issues of similar making of loan commitments and maturity. the financing ofthem. The IBRD's standing in the capital markets is based on a combi InCOnle nation ofconservative lending poli Each year since 1948, the cies, strong financial backing by its IBRD has made a profit. Its net members, and prudent financial income ranged from $209 million management. Building on this base to $588 million annually between of prudent policies and solid finan fiscal 1975 and fiscal 1980. It rose to cial backing, the IBRD has recently around $600 million in both fiscal taken steps to enhance its financial years 1981 and 1982. strength during the current period As of June 30, 1982, the IBRD of economic difficulties. In particu had retained earnings of over $2.8 lar, it began a program of short billion, which form part of its re- term borrowing in the United States of America. The purpose of this program, in which funds are raised through the issue ofDiscount A collage at IBRD bonds denominated in Notes, is to enhance the Bank's various currencies. borrowing flexibility by developing access to a large new source of finance at a time when the IBRD's borrowing requirements are ex panding. In order that this new type of borrowing would not expose the IBRD to excessive interest-rate risk, a system ofperiodically adjus table interest rates has also been introduced. The interest rate on all new loans negotiated since July I, 1982, is no longer fixed for the life of the loan, as was the case on earlier IBRD loans. It is adjusted every six months-up or down-in accord with the average cost of a pool of 48 IBRD's Net Income 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 Fiscal Year sources. In allocating earnings, the In keeping with this liquidity Bank's member countries give first policy, the IBRD builds up its importance to strengthening the liquidity position systematically by IBRD's reserves. The amount left borrowing more than its current after making that allocation is requirements at times when funds transferred to IDA. Since 1964, ap can be obtained at reasonable costs proximately $1.7 billion has been and terms of maturity. Thus, it transferred in grants from the borrows funds, when available, in IBRD's net income to IDA. anticipation offuture needs. It does not wait until it actually needs the Liquidity Policy funds. In this way, ifthe IBRD does For some years, the IBRD has not wish to borrow because interest kept its short-term liquid assets in rates are too high or the maturities an amount sufficient to meet 40 available are unsuitable, it can draw percent of its cash requirements for down its liquidity to meet its re the subsequent three years. At June quirements until market conditions 30, 1982, these liquid assets totaled improve. In short, the IBRD's almost $9.4 billion. The policy of liquidity position gives it the flexi maintaining a high degree ofliquid bility to decide where, how much, at ity has an important influence on what cost, and on what terms it will the IBRD's borrowing program. borrow. 49 50 The International Development Association The International Development cessionary terms IDA offers go to Association (IDA) is an affiliate of the country as a whole, and not to the IBRD. IDA's resources, pro any particular enterprise or entity vided primarily by the richer coun within it. The enterprises benefiting tries, are used to help finance devel from IDA funds, under such condi opment projects and programs in tions, remain subject to the finan the poorest nations. cial discipline necessary for effi IDA does what the IBRD does, cient operation. and it shares the same staff. IDA The demand for IDA assis makes money available to help sup tance has always exceeded the sup port high-priority projects that fos ply of available resources. IDA al ter economic development in de ways, therefore, has had to ration its veloping countries. However, the money carefully. In doing so, it IBRD and IDA do not lend on the takes four main criteria into consid same terms. The terms for IDA eration: "credits" (so-called to distinguish · The poverty level in member them from IBRD "loans") are fifty countries . year maturities, ten-year grace · The creditworthiness of the periods before repayments of prin prospecti ve borrower. cipal begin, and no interest (but an · The economic performance annual commitment charge of 0.5 of the prospective borrower . percent on the undisbursed portion, · The availability of projects and a service charge ofO. 75 percent suitable for IDA financing. on the disbursed portion, of each Per capita income levels in credit). The charges are intended to member countries affect the eligi cover administrative costs. bility for credits. The income level The difference in terms of beyond which IDA credits are lending reflects the important dif severely rationed-currently $795 ference in countries assisted by the per capita in 1981 dollars-has IBRD and IDA. IDA credits are been modified from time to time, designed to assist mainly those very chiefly to take account of rising poor developing countries that can price levels. not afford to borrow on IBRD This $795 level is not regarded terms. Some IDA borrowers also as a ceiling that cannot, under any obtain some IBRD loans. Most circumstances, be pierced. But it IDA borrowers are in Africa south has been thought ofas establishing a of the Sahara and in South Asia. strong presumption against lending A woman in a rice field IDA lends only to govern to member countries in which the near Hyderabad (India). ments. But governments com average annual income per inhabi IDA has committed more than $5 billion in support monly relend IDA funds to enter tant is higher. 01 agriculture and rural prises, both pri va te and public, On the other hand, an income development in South Asia. Dramatic increases within the country. Such relending level below $795 does not, of itself, in agncultural production is generally on terms that reflect the create a presumption in favor of have taken place in the region dunng the past cost ofcapital in the country. IDA lending. A number of coun decade. Thus, the benefits of the con tries in the $410-$795 range, and 51 even a few in the "under $410" category, are considered capable of servicing some IBRD loans or a blend oflBRD loans and IDA cred its. IDA has three main sources of funds. They are: · Members' subscriptions. · Contributions provided mainly by the richer coun tries, but, in recent years, by an increasing number of de veloping countries, as well. · Transfers from the IBRD's income and repayments on IDA credits. The initial subscription ofeach member of IDA was roughly pro Lending for the portional to its sUbscription to the development of sub capital stock of the IBRD. IDA's Saharan Africa is one of the Bank's major charter provides for two categories priorities. The photo of membership: Part I, which in shows Ethiopian women carrying water. cludes the richer countries, and Part II, which is composed of develop ing countries. Each Part I member pays its full subscription in convert period from July I, 1964, to June ible funds, all of which can be used 30, 1966. Over the years, the replen by IDA in its lending activities. ishments expanded to the point Each Part II member pays only 10 where, by 1980, thirty-three coun percent of its subscription in con tries agreed to provide approxi vertible funds. The other 90 percent mately $12 billion under the sixth is paid in the member's own cur replenishment covering the three rency and cannot be used for lend years from July 1,1980, to June 30, ing without the consent ofthe mem 1983. ber. At present, there are twenty Some of the newer donors un two IDA members in the Part I der the more recent replenishment category. The remaining members agreements have been oil-exporting are in the Part II category. countries like Saudi Arabia, the Since its inception, there have United Arab Emirates, and Venez been six replenishments of IDA uela. Others include such develop resources. The first replenishment ing countries as the Republic of in 1964 involved contributions of Korea and Yugoslavia. $750 million from eighteen mem A report entitled "IDA in Ret bers, all in the Part I category, for rospect," published for the Bank in commitments in the three-year September 1982, comprehensively 52 reviews the work IDA has done particularly active, have over the past two decades. The sharply reduced the need for report notes that IDA has commit massive food imports in the ted $27 billion to more than 1,300 region and, in India's case, projects in seventy-eight countries have resulted in virtual self since 1960. Details are given of sufficiency. specific projects and programs as · IDA lending has been effec sisted by IDA-failures as well as tive in promoting develop successes. The broad analysis ment. reaches several conclusions: · IDA has gained a vast · Twenty-seven nations, once amount of understanding by A worker at a tea eligible for IDA credits on "doing," including learning factory in Indonesia. from past mistakes. Twenty-seven countries, the basis oftheir weak econo including Indonesia, that mies, have developed to the · IDA has been remarkably once were IDA stage at which they can fi successful in attracting finan borrowers, now can finance further growth nance further growth on con cial support. on conventional terms. ventional borrowing terms. · IDA has a key role to play in · Dramatic increases in agri meeting the needs for conces cultural production in South sional aid to the poorest Asia, where IDA has been countries. A scene in a laboratOf'( at Qinghua University in China. The Bank is helping the country to implement a program to strengthen higher education and research activities in science and engineering. 53 54 The International Finance Corporation The International Finance Corpo expand the domestic financing ration (IFC) was established in available for pri vate sector develop 1956 as an affiliate of the IBRD ment with special emphasis on specifically to help promote and equity and long-term finance, the assist productive private enter Corporation, together with the prises in developing countries. Al World Bank, makes a special effort though IFC is a financial institu to encourage the establishment and tion, its purpose goes beyond sim development of capital markets. ply making funds available to in Local investors and financial vestors. In helping to finance prod institutions are by far the most uctive enterprises in the private important source of financing for sector, it also provides financial, private enterprise in developing legal, and technical advice. countries and, over the years, have Its functions include bringing supplied more than half the financ together and harmonizing the often ing for ventures assisted by IFC. diverse interests of the parties in IFC conducts its operations in volved in an enterprise-domestic accordance with certain basic prin and foreign sponsors, financial in ciples. In the projects it assists, it stitutions and investors, technical always invests with others, as its partners, and the host govern function is to mobilize and supple- ments-thereby contributing an element of confidence to the ven ture. Concurrently, IFC has a spe cial responsibility to identify and promote ventures, find sponsors for US$ Millions Portfolio them, and encourage others to in 3,000 vest capital and expertise in them. This function is often described as IFe's "catalytic" role; it is the hall mark of its distinctive approach to development assistance. Working in partnership with others, the Corporation not only helps individual enterprises, but also creates a better investment en vironment. When asked by mem ber countries, it provides technical assistance on issues as diverse as pricing and market allocation, de Winnowing wheat at a velopment of a specific sector, and major agribusiness the design of laws and regulations venture producing grains and sugar in Egypt. The to promote and monitor private venture is supported by investment. a number of domestic and foreign institutions To improve the efficiency of and 'IFe local financial systems and to help 1979 1980 1981 1982 55 ment private capital, not replace it. IFC is prepared to assist all kinds of Thus, IFC will not finance ventures ventures, irrespective of the struc for which, in its opinion, sufficient ture of their ownership. It not only capital can be obtained on reason works with wholly private-owned .~-:. able terms from other sources. IFC and mixed (public/private) enter does not require, nor will it accept, prises, but also, where circum government guarantees of repay stances justify, with wholly govern \. ' .; ~ ment. It will make an investment ment-owned enterprises that are J .'"" ~ I. " only ifthe government of the mem channels for assistance to the pri ber country has no objections. IFC vate sector. This policy reflects the IFC helped to establish will invest only if appropriate ar diverse nature and circumstances this ethylene oxide and rangements exist for repatriating its of its member countries. In particu glycol planl as part 01 a new petrochemical investments and earnings. lar, it permits IFC to assist those complex being created Because the financing pro countries in which the private sec at Capuava in Brazil. The output is used vided by IFC is not earmarked, it tor is still at an early stage ofdevel principally to produce can be put to a variety of uses-to opment. For example, one way the polyester to help meet growing domestic buy equipment, to cover foreign Corporation can provide assistance demand. exchange or local costs, as working to smaller private entrepreneurs is capital, or for any other legitimate through local development finance business purpose. Money invested corporations which are often spon and lent by IFC is untied. The only sored and predominantly financed requirement is that it be spent in by government. one of the member countries of the The investments that IFC sup IBRD or Switzerland. ports must do more than meet the Even though it might hold an test of the market. They must also equity interest in a venture, IFC pass the test ofbenefiting a country does not, as a general rule, take part economically. An economic rate of in management nor is it represented return is calculated for each invest . on any board of directors. It main ment proposal, and its potential tains a continuing interest in such contribution to development is as enterprises through field visits and sessed. The considerations on periodic consultations with man which the assessment is based vary agement. Only in exceptional cir from project to project, but most cumstances does IFC exercise its take into account the degree to voting rights as a shareholder. The which the investment contributes Corporation is constantly revolving to one or more of the following its funds by selling securities from objectives: its portfolio to other investors, pref · Greater foreign-exchange erably to investors in the country in earnings or smaller foreign which the enterprise is located. exchange outlays. · Increased employment, im Diversified Assistance provements in the skills of In supporting the development both labor and management, of its member countries through the or higher productivity of promotion of their private sectors, capital and labor. 56 · The acquisition ofappropri ate technological and scien tific knowledge and skills. · The development of a coun try's natural resources on fair and reasonable terms. However, as a financial institu tion, IFC's performance must also be measured against financial crite ria. The ventures it assists, there fore, must be financially sound and Two expansion projects by this Thai cement company potentially profitable. Only by were assisted by tFe. They increased the company's originat capacity of 650,000 metric tons a year to about maintaining and applying these 2.8 million tons. investment criteria can IFC attract business and financial partners and tum over its capital by selling its precaution is taken to ensure that investments. It means that every the projects IFC supports do not become economic liabilities to its member countries. In addition, the earnings from its investments de IFe's Portfolio fray administrative costs and sup Proportion of Ventures by Region port technical assistance and pro grams of project promotion. The Corporation takes an active role in identifying and encouraging new projects, especially in the poorest countries. Investment Growth Starting with thirty-one mem bers and an authorized capital of $100 million in 1956, IFC today has more than 120 members and an authorized capital of $650 million. Supported by a major capital in crease in 1978, its recent growth has been particularly notable. The $612 million of loans and equity financ ing provided during fiscal 1982 equaled the total amount of invest ments approved during the first fifteen years of the Corporation's history. By the end of fiscal 1982, IFC had approved investments of As of June 30, 1982 about $4.7 billion in more than 650 57 ventures with a total cost ofalmost $21.5 billion. Syndications, an important measure of the Corporation's abil ity to attract private financing for the projects in which it is involved, averaged about $2 million a year during the early I 960s. They were almost $190 million in fiscal 1982. Today, IFC has a portfolio ofloans A worker in a shipyard and equity investments held for its in Cebu , Philippines. The own account worth nearly $1.8 bil company's ship-repair capacity was doubled in lion in about 320 companies spread a modernizalion and over seventy developing countries. expansion program financed by IFC and The portfolio is as diverse as the This fish-processing plant and a fleet of fishing vessels local inveslors and needs and conditions of the coun are operated by an Argentine enterprise launched by instilutions. local inveslors, a Spanish technical partner, and IFG. tries in which IFC has invested. This, in part, is due to the natural selection process by which the pri vate sector responds to investment opportunities. But it is also due to a conscious policy ofthe Corporation to direct its efforts and resources to ventures that have a particularly large effect on the country's eco nomic development. Over the past twenty-six years, the preponderance of investments has been in manufacturing firms over 75 percent. The heaviest con centration, accounting for about one-fifth of all investments, has been in cement and other construc tion materials. About 9.5 percent of the Corporation's investments have gone to financial institutions such as venture-capital companies, development finance corporations, leasing companies, and security marketing institutions. Of total investments, 10.5 percent have been in mining operations; 5 per cent in agribusiness; and 4 percent in services, such as hotels and tour ist facilities. As of June 30, 1982 58 Changing Character come more active in helping to What these totals do not reflect increase production of basic foods, is the changing character of IFe's especially poultry and fish. It has portfolio. While manufacturing is also supported efforts to improve expected to remain the single larg processing and storage facilities for est field for investment, greater em a number of basic commodities. phasis has been placed in recent Reflecting the changing needs of years on helping to develop energy developing countries, as well as the resources such as oil, gas, and coal. changing character of financial The Corporation has also helped to markets, IFC is providing more establish a number of ventures to assistance to enable enterprises and develop nontraditional energy institutions in developing countries sources, such as alcohol. In the to gain access to international capi agribusiness sector, IFC has be tal markets. This railroad·car repair facility in the Ivory Coast was assisted by financing from a development finance company that IFC helped establish and later expand 59 Role in the International Con1munity The Bank has had a significant role handling public funds, to ex in the international development plain its policies and activi community for almost three dec ties. ades. The role has become more Among the organizations with important in recent years as a result which the Bank is involved, jointly of several factors: with the International Monetary · The Bank has expanded as a Fund, is the Development Com source of financial and tech mittee. The Committee was set up nical assistance for develop in 1974 to keep under review the ment. With the growth in transfer of real resources to the size and membership, it has developing countries. It has twenty become more international, two members at the Ministerial and the impact of its work is level representing the member felt more deeply. Its policies countries of the Bank and the Fund. and activities have, there Subjects discussed at its twice fore, begun to attract greater yearly meetings have included the attention. lending operations of the Bank, · The Bank has diversified its regional banks, energy, private lending in the traditional foreign investment, and the situa infrastructure sectors and tion and prospects of world devel has been supporting an in opment. creasing number of projects The Bank's role in the global in the newer sectors such as community is supported through a rural development, urban wide variety of activities that range ization, and population. At from the operational to the intellec the same time, greater em tual. It is reinforced through an phasis has been given to the equally wide variety of relation social dimensions of eco ships: with the United Nations sys nomic growth. The need has tem; with other international, re emerged, therefore, for a gional, and national organizations; fuller exchange of ideas, with the academic community; and knowledge, and experience with many individuals and institu with others engaged in simi tions interested in development. lar fields. The Bank's pro Much of the Bank's work with gram of economic and social the U.N. system is strongly opera research supports its opera tional in nature. Under -"coopera tional work and makes an tive programs" with the Food and Onchocerciasis, or important contribution to Agriculture Organization of the riverblindness, affects such an exchange. United Nations (FAO), the United the lives of millions of peopte in Western · With growing global aware Nations Educational, Scientific, Africa. The Bank is ness of the mutual depen and Cultural Organization (U n supporting a program to control the disease In dence of nations, the Bank esco), the World Health Organiza this photo from Upper has been giving greater em tion (WHO), and the United Na Volta, a boy leads a blind woman who is a phasis to its responsibility, as tions Industrial Development Or victim of onchocerciasis an international institution ganization (UNIDO), for example, 61 assistance is provided to govern organizations in the Middle East, ments to identify and prepare proj including the Abu Dhabi Fund for ects for Bank financing. Arab Economic Development, the In addition to cooperating with Arab Fund for Economic and Social various parts of the U.N. system, Development, the Kuwait Fund for the Bank has developed a close and Arab Economic Development, the productive relationship with sev OPEC Fund for International De eral multilateral and bilateral aid velopment, the Saudi Fund for De Cross·pollinating chick peas at the Internationat Crops Research Institute for the Semi-Arid Tropics near Hyderabad (India). The Institute is part of a network of agricul tural research centers and programs supported by the Consultative Group on Interna lional Agricultura t Research . The Bank is a cosponsor of CGIAR. 62 velopment, the Islamic Develop with the FAO and the United Na ment Bank, and the Banque Arabe tions Development Programme pour Ie Developpement Economi (UNDP), of the Consultative que en Afrique. Group on International Agricul Other examples of activities tural Research (CGIAR). The that are essentially operational can CGIAR supports a network ofthir be found in such fields as aid coor teen international agricultural re dination, agricultural research, and search centers and programs. The control of riverblindness in West research and training conducted at ern Africa. In the field ofaid coordi the centers aim primarily at increas nation, for instance, the Bank has ing food production in developing taken the lead in forming groups of countries. The CGIAR network is donors to coordinate the flow of involved in research on all of the financial and technical assistance to major food crops in the major eco individual developing countries. A logical zones of the developing coordination group helps to ensure world. that multilateral and bilateral do The program for the control of nors support consistent develop onchocerciasis (riverblindness) in ment goals that match the goals of West Africa's Volta river basin pro the recipient country, and that fi vides another example of the nancial and technical aid from dif Bank's participation in an activity ferent sources is applied efficiently that is international in both spon to priority requirements. It also sorship and scope. The program is facilitates better planning and exe jointly sponsored by the Bank, cution by the developing country, WHO, the FAO, and the UNDP. and so enables it to use assistance Fourteen donor governments, as more productively. well as the African Development Active aid coordinating groups Bank, the OPEC Fund for Interna chaired by the Bank include those tional Development, the Sabah Al for Bangladesh, Bolivia, Burma, the Salem Al Mubarak Al-Sabah Foun Caribbean, Colombia, Egypt, India, dation, the UNDP, and the World Kenya, the Republic of Korea, Bank, contribute to the fund. Madagascar, Mauritius, Nepal, The Bank's work in support of Pakistan, Peru, the Philippines, Sri projects and programs, whether Lanka, Sudan, Tanzania, Thailand, national or international, nourishes Uganda, Zaire, and Zambia. The -and is in turn nourished by-a Bank also participates in meetings sizable program of economic and of the aid coordination groups for social research. This constant inter Indonesia, chaired by the Nether action between the operational and lands, and for Turkey, chaired by the intellectual strengthens the the Organisation for Economic quality of the knowledge, analysis, Co-operation and Development and advice the Bank is able to offer (OECD). in its dialogue with individual In the case of agricultural countries and with the interna research, the Bank IS cosponsor, tional community. 63 64 Organization and Management The organization charts on the the delegation of authority and re following pages broadly reflect how sponsibility_ various functions are performed in A notable feature ofthe organi the Bank and in IFC zational structure is the Operations The functions of the Bank's Evaluation staff, reporting to the Governors and Executive Directors Director-General, Operations Eval are outlined on page 13_ uation_ Its activities are described Subject to the direction of the on page 39_ Executive Directors on questions of A W_ Clausen became the sixth policy, the President is the chief President of the IBRD, IDA, and executive officer of the Bank and is IFC on July I, 198'- The first five responsible for its overall manage Presidents were: Eugene Meyer, ment Important policy recommen from June 18 to Decem ber I8, dations are reviewed by a group, 1946; John J_ McCloy, from March known as the Managing Commit 17, 1947, to June 30, 1949; Eugene tee, consisting of the President, the R_ Black, from July I, 1949, to two Senior Vice Presidents, and the December 31, 1962; George D_ The Artictes 01 five Vice Presidents who report Woods, from January I, 1963, to Agreement of the IBRo were drawn up in July directly to the President All Vice March 31, 1968; and Robert S_ 1944 by the United Presidents of the Bank and the McNamara, from April I, 1968, to Nations Monetary and Financial Conference at Director-General, Operations Eval June 30, 198 L Bretton Woods in New uation, along with the Executive The Bank and IFC have a total Hampshire, with forty four countries Vice President and two Vice Presi staff of about 5,800_ More than 100 represented The photo dents of IFC, meet periodically in a nationalities are represented_ Over shows the United States Senior Management Council under 95 percent ofthe staff is stationed at Secretary of the Treasury, Henry the chairmanship of the President the institutions' headquarters in Morgenthau, Jr., The management structure is de Washington, D_C The remainder addressing fhe delegates to the signed to ensure a collegial process are based in more than thirty coun Conference . of decisionmaking and to facilitate tries around the world_ 65 Offices ofthe World Bank Headquarters: 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. Ghana: The World Bank, c/o Royal Guardian Exchange Assurance Building, Head Office, High Street, Accra, Ghana; mailing address-P.O. Box M27 New York Office: India: Resident Mission, The World Bank, New Delhi, India; mailing The World Bank Mission to the United address-P.O. Box 416 Nations/New York Office Indonesia: Resident Staff in Indonesia, The World Bank, Arthaloka 747 Third Avenue (26th noor) Building (8th floor), 2 Jalan Jendral Sudirman, Jakarta, New York, N.Y. 10017, U.S.A. Indonesia; mailing address-P.O. Box 324/JKT Mali: The World Bank, Quartier du Pont, rue Square Lumumba, European Office: The World Bank, 66, avenue d'h:na, 75116 Paris, Bamako, Mali; mailing address-B.P. 1864 France Nepal: The World Bank, R.N.A.C. Building (first floor), Kathmandu, London Office: The World Bank, New Zealand House (15th floor), Nepal; mailing address-P.O. Box 798 London SWI Y4TE, United I(jngdom Niger: The World Bank, Immeuble EI Nasr (12e etage-escalier A), Niamey, Niger; mailing address-Banque mondiale, B.P. 12402 Geneva Office: World Bank Representative to UN Organizations Nigeria: The World Bank, 30 Macarthy Street, Lagos, Nigeria; Geneva, ITC Building, 54 Rue de Montbrillant, Geneva, Switzerland; mailing address-The World Bank, P.O. Box 104, mailing address-P.O. Box 127 Pakistan: The World Bank, Islamabad, Pakistan; mailing 1211 Geneva 20 CIC, Switzerland address-P.O. Box 1025 Tokyo Office: The World Bank, Kokusai Building (Room 916), I-I, Peru: Banco Mundial, Avenida Central 643 (10 Piso), Lima, Peru; Marunouchi 3-chome, Chiyoda-ku, Tokyo 100, Japan mailing address-Apartado 4480 Rwanda: The World Bank, I(jgali, Rwanda; mailing address-P.O. Eastern Africa: Regional Mission in Eastern Africa, The World Bank, Reinsurance Plaza (5th and 6th floors), Taifa Road, Nairobi, Box 609 Saudi Arabia: Resident Mission, The World Bank, Riyadh, Saudi Kenya; mailing address-P.O. Box 30577 Arabia; mailing address-P.O. Box 5900 Western Africa: Regional Mission in Western Africa, The World Senegal: The World Bank, Immeuble S.D.I.H., 3, Place de Bank, Immeuble Shell, 64, Avenue Lamblin, Abidjan 01, Ivory l'lndependance, Dakar, Senegal; mailing address-B.P. 3296 Coast; mailing address-B.P. 1850 Somalia: The World Bank, c/o Somali Commercial & Savings Bank Thailand: Regional Mission, The World Bank, Udom Vidhya Building (4th floor), Mogadishu, Somalia; mailing address-P.O. Building, 956 Rama IV Road, Sala Daeng, Bangkok 5, Thailand Box 1825 Bangladesh: Resident Mission, The World Bank, 222 New Eskaton Sri Lanka: The World Bank, People's Bank, Head Office (lOth floor), Road, Dhaka, Bangladesh; mailing address-G.P.O. Box 97 Colombo 2, Sri Lanka; mailing address-P.O. Box 1761 Bolivia: Banco Mundial, Edificio BISA (4 0 Piso), Avenida 16 de julio Sudan: The World Bank, 28 Block 2H, Baladia Street, Khartoum , 1628, La Paz, Bolivia; mailing address-Casilla 8692 Sudan; mailing address-P.O. Box 2211 Burundi: The World Bank, 45, Avenue de la Poste, Bujumbura, Tanzania: The World Bank, N.I.C. Building (7th floor, B), Dar es Burundi; mailing address-B.P. 2637 Salaam, Tanzania; mailing address-P.O. Box 2054 Cameroon: The World Bank, Immeuble Kennedy, Avenue Kennedy, Uganda: The World Bank, Kampala, Uganda; mailing address-P.O. Yaounde, Cameroon; mailing address-B.P. 1128 Box 4463 Colombia: Banco Mundial, Edificio "Aseguradora del Valle," Carrera Upper Volta: The World Bank, Immeuble BECEA (3 e etage), 10, No. 24-55 (Piso 17), Bogota D.E., Colombia; mailing Ouagadougou, Upper Volta; mailing address-B.P. 622 address-Banco Mundial, Apartado Aereo 10229 Zaire: The World Bank, Building UZB, Avenue des Aviateurs, Ethiopia: The World Bank, I.B.T.E. New Telecommunications I(jnshasa I, Republic of Zaire; mailing address-P.O. Box 14816 Building (first floor), Churchill Road, Addis Ababa, Ethiopia; Zambia: The World Bank, Kulima Tower (13th floor), Katunjila mailing address-P.O. Box 5515 Road, Lusaka, Zambia; mailing address-P.O. Box 35410 The World Bank Organization Chart Offices of the International Finance Corporation Headquarters Regional Mission in East Asia 1818 H Street, N.W. Central Bank of the Philippines Washington, D.C. 20433, U.S.A. Manila, Philippines Telephone: (202) 477·1234 Telephone: 58·93·12 Telex: ITT 440098 Telex: 742·40541 RCA 248423 Cable: CORINTFIN WU 64145 Regional Mission in Cable: CORINTFIN Eastern Africa Reinsurance Plaza, 5th Floor New York Office Taifa Road 747 Third Avenue, 26th Floor P.O. Box 30577 New York, New York 10017, U.S.A. Nairobi, Kenya Telephone: (212) 754·6008 Telephone: 24726 Telex: 963·22022 European Office Cable: CORINTFIN New Zealand House, Haymarket London SW I Y4TE, England Regional Mission in Telephone: 930·8741 the Middle East Telex: 851·919462 3 Elbergas Street Cable: CORINTFIN Garden City Cairo, Arab Republic of Egypt Telephone: 23923, 25045 and 982914 Paris Office 66 Ave., d'Iena Telex: 927·931 10 751 16 Paris, France Cable: IFCAI Telephone: 723·54·21 Regional Mission in Telex: 842·620628 Western Africa Cable: CORINTFIN Immeuble Alpha 2000 Rue Gourgas Tokyo Office OI·P.O. Box 1748 5-\, Nibancho, Chiyoda-ku Abidjan.OI, Ivory Coast Tokyo 102, Japan Telephone: 32·65·97 and 33·11·51 Telephone: (03) 261·3626 and (03) 408·0634 Telex: 969·3533 Cable: CORINTF\N Telex: 781·26554 Cable: SKORINTFlN International Finance Corporation Organization Chart Credits Text Dinesh Bahl was responsible for preparing the text of "The World Bank & International Finance Corporation." Design "The World Bank & International Finance Corporation" was designed by Bill Fraser. Photographs Inside front cover (Yemen Arab Republic): Tomas Sennett. Page 8-9, anonymous; page 10, Jamil Quraishy; page 12, Brooks Blanck; page 13, Giuseppe Franchini; page 14, Tomas Sennett; page 15, Peter C. Muncie; page 16, Peter C. Muncie; page 17, Ray Witlin; page 18, Ivan Massar; page 19 (bottom), Ray Witlin; page 19 (right), Yosef Hadar; page 20 (left), Ramon E. Peteta; page 20 (bottom), Keum Yong Choi; page 20 (right), Peter C. Muncie; page 21, Edwin G. Huffman; page 22 (top), Ray WitIin; page 22 (bottom), Ray Witlin; page 23, Peter C. Muncie; page 24 (top), Tomas Sennett; page 24 (bottom), Tomas Sennett; page 25 (left), Pamela Ryden Johnson; page 25 (right), James Pickerell; page 26, Kay Chernush; page 27, Ray Witlin; page 28, Peter C. Muncie; page 29, Ray Witlin; page 30 (left), Ray Witlin; page 30 (right), James Pickerell; page 31, Kay Chernush; page 32, anonymous; page 33, Mary M. Hill; page 34, Tomas Sennett; page 40, Ray Witlin; page 41, Yosef Hadar; page 43, Giuseppe Franchini; page 44, Yosef Hadar; page 48, Yosef Hadar, page 50, Carl Purcell; page 52, Ray Witlin; page 53 (bottom), Peter C. Muncie; page 53 (right), Tomas Sennett; page 54, Kay Chernush; page 56, James Pickerell; page 57, James Pickerell; page 58 (left), James Pickerell; page 58 (right), James Pickerell; page 59, Ray Witlin; page 60, Ray Witlin; page 62, Peter C. Muncie; page 64, U.S. Office of War Information in the National Archives. First printing: June 1983. "What improves the circumstances ofthe greater part can never be regarded as an inconvenience to the whole. No society can surely be flourishing and happy, ofwhich the far greater part ofthe members are poor and miserable." Adam Smith, The Wealth a/Nations The World Bank m Headquarters: 1818 H Street, N .W. Washington, D.C. 20433, U.S.A. European Office: 66, avenue d'I~na 75116 Paris, France Tokyo Office: Kokusai Building I - I , Marunouchi 3-chome Chiyoda-ku, Tokyo 100, Japan Telephone: (202) 477-1234 Telephone: (I) 723- 54.21 Telex: WUI 64145 WORLDBANK Telex: 842-620628 Telephone: (03) 214-5001 RCA 248423 WORLDBK Telex: 781-26838 Cable address: INTBAFRAD WASHINGTONDC ISBN 0-8213-0178-0