46256 THE WORLD BANK ANNUAL REPORT 2008 YEAR IN REVIEW OPERATIONAL SUMMARY | FISCAL 2008 IBRD MILLIONS OF DOLLARS 2008 2007 2006 2005 2004 Commitments 13,468 12,829 14,135 13,611 11,045 Of which development policy lending 3,967 3,635 4,906 4,264 4,453 Number of projects 99 112 113 118 87 Of which development policy lending 16 22 21 23 18 Gross disbursements 10,490 11,055 11,833 9,722 10,109 Of which development policy lending 3,485 4,096 5,406 3,605 4,348 Principal repayments (including prepayments) 12,610 17,231 13,600 14,809 18,479 Net disbursements (2,120) (6,176) (1,767) (5,087) (8,370) Loans outstanding 99,050 97,805 103,004 104,401 109,610 Undisbursed loans 38,176 35,440 34,938 33,744 32,128 a Operating income 2,271 1,659 1,740 1,320 1,696 Usable capital and reserves 36,888 33,754 33,339 32,072 31,332 Equity-to-loans ratio 38% 35% 33% 31% 29% a. Reported in IBRD’s financial statements as net income before Board of Governors–approved transfers and net unrealized (losses) gains on nontrading derivatives, loans, and borrowings measured at fair value, per Financial Accounting Standard No. 133 as amended. IDA MILLIONS OF DOLLARS 2008 2007 2006 2005 2004 Commitments 11,235 11,867 9,506 8,696 9,035 Of which development policy lending 2,672 2,645 2,425 2,331 1,698 Number of projects 199 188 173 165 158 Of which development policy lending 29 35 30 33 23 Gross disbursements 9,160 8,579 8,910 8,950 6,936 Of which development policy lending 2,813 2,399 2,425 2,666 1,685 Principal repayments 2,182 1,753 1,680 1,620 1,398 Net disbursements 6,978 6,826 7,230 7,330 5,538 Credits outstanding 113,542 102,457 127,028 120,907 115,743 Undisbursed credits 27,539 24,517 22,026 22,330 23,998 Undisbursed grants 5,522 4,642 3,630 3,021 2,358 Development grant expenses 3,151 2,195 1,939 2,035 1,697 Note: Projects scaled up through additional financing are included in the total number of operations. LETTER OF TRANSMITTAL This Annual Report, which covers the period from July 1, of the Board of Executive Directors, has submitted this report, 2007, to June 30, 2008, has been prepared by the Executive together with the accompanying administrative budgets and Directors of both the International Bank for Reconstruction audited financial statements, to the Board of Governors. and Development (IBRD) and the International Development Annual reports for the International Finance Corporation Association (IDA)—collectively known as the World Bank—in (IFC), the Multilateral Investment Guarantee Agency (MIGA), accordance with the respective bylaws of the two institutions. and the International Centre for Settlement of Investment Robert B. Zoellick, President of IBRD and IDA, and Chairman Disputes (ICSID) are published separately. THE WORLD BANK ANNUAL REPORT 2007 THE WORLD BANK ANNUAL REPORT 2008 CONTENTS CD-ROM Contents Message from the President of the World Bank Year in Review and Chairman of the Board of Executive Directors 2 Financial Statements The Board of Executive Directors 3 New Operations Approved Remuneration of Executive Management, Lending Data Executive Directors, and Staff 6 Income by Region World Bank Group Fiscal Year Highlights 7 Organizational Information 1 An Inclusive and Sustainable Globalization 11 World Bank Lending 2008 2 Regional Perspectives 27 (PowerPoint presentation) Africa 30 The CD-ROM contains the complete East Asia and Pacific 34 contents of the book in Arabic, Chinese, South Asia 38 English, French, Hindi, Japanese, Europe and Central Asia 42 Portuguese, Russian, and Spanish. Latin America and the Caribbean 46 Middle East and North Africa 50 3 Summary of Fiscal Year Activities 54 International Poverty Lines and the 2008 Annual Report Poverty estimates in this report use international poverty lines that are based on 1993 purchasing power parity (PPP) conversion factors. This was the latest measure at press time. As of August 2008, the World Bank was in the process of revising poverty estimates using more recent PPP conversion factors that are based on the 2005 round of the International Comparison Program. Note: The complete Financial Statements, including Management’s Discussion and Analysis, audited financial statements of the International Bank for Reconstruction and Development, and audited financial statements of the International Development Association, are published on the CD-ROM enclosed with this report. This Annual Report is also available on the Internet at http://www.worldbank.org. All dollar amounts used in this Annual Report are current U.S. dollars unless otherwise specified. As a result of rounding, numbers in tables may not add to totals and percentages in figures may not add to 100. Throughout this report, the terms “World Bank” and “Bank” refer to IBRD and IDA. “World Bank Group” refers to IBRD, IDA, IFC, MIGA, and ICSID. THE WORLD BANK ANNUAL REPORT 2008 1 MESSAGE FROM THE PRESIDENT OF THE WORLD BANK AND CHAIRMAN OF THE BOARD OF EXECUTIVE DIRECTORS 2008 has been an important year for the World Bank Group. to solving problems, not just analyzing them. This may be our I am pleased to introduce an Annual Report that captures the most vital task, and we have much work ahead of us. progress we have made so far and the work ahead of us. The Bank Group has been especially focused on respond- This year, we have developed six strategic priorities to ing to high food and energy prices. We are working with the focus our effort. UN and other international partners to identify particularly We are giving particular attention to the poorest countries, vulnerable countries requiring immediate assistance. The especially in Africa. Bringing opportunity and growth to these Bank Group created a $1.2 billion Global Food Crisis Response countries means quality education, especially for girls; Program to respond quickly to the needs of our clients, and we addressing disease, malnutrition, and clean water; and many are assisting countries to increase production and productivity other social development topics. It involves a growth agenda: across the agricultural value chain, to transform today’s food infrastructure, energy, regional integration linked to global problem into a growth opportunity. The Bank Group is also markets, and a healthy private sector. This past year, we working to address short-term needs, and scaling up public achieved a record-setting IDA15 of $41.7 billion, representing and private sector projects that enhance sustainable energy a 30 percent increase over IDA14. We launched an initiative to access for the poor, efficiency of energy consumption and/or link Sovereign Wealth Funds with equity investment in Africa, supply, and diversification of energy sources to reduce risk. to help sub-Saharan Africa reach its potential as another pole We are completing the implementation of the recommen- of growth for the global economy. dations of the Volcker Report, to enhance transparency and The Bank Group is focused on development in states in prevention, clarify responsibilities, strengthen follow-up fragile situations or affected by conflict—the modern version actions when we discover fraud and corruption, and make us of the challenge the Bank faced after World War II, when the a stronger institution. We also launched our Governance and International Bank for Reconstruction and Development Anti-Corruption (GAC) strategy, a key foundation for our helped reconstruct Europe and Japan. Today, we are trying development work. to help Liberia, Afghanistan, Haiti, Kosovo, and others. During fiscal 2008 the Bank Group committed $38.2 billion We are addressing the challenges of Middle Income in loans, grants, equity investments, and guarantees to its Countries. This year, we achieved the first reduction in loan members and to private businesses in member countries—an prices in over a decade, along with simplification of pro- increase of $3.9 billion (11.4 percent) from fiscal year 2007. cesses, extension of maturities, and improved access to risk IDA commitments were $11.2 billion, 5 percent lower than management tools. We are developing a host of knowledge the previous year. IBRD commitments in fiscal 2008 totaled and financial services to help these important clients, and $13.5 billion. IFC committed $11.4 billion for its own account working with them as they expand their activities in other and mobilized an additional $4.8 billion for 372 private sector countries, so as to broaden and diversify the stakeholders investments in developing countries, more than 40 percent of in the international economic system. which were in IDA countries. Of MIGA’s $2.1 billion in guaran- The Bank is increasing work on global public goods, from tees, $690 million went to projects in IDA-eligible countries. HIV/AIDs, avian influenza, malaria, TB, and health systems to MIGA’s exposure in IDA countries now stands at $2.3 billion, pull this work together, to the challenges of global climate representing 35.6 percent of its portfolio. change, both adaptation and mitigation. We launched the We have built a good momentum, yet we have much to do to Forest Carbon Partnership Facility and Carbon Partnership advance an inclusive and sustainable globalization that offers Facility, and the Board approved our new Climate Investment opportunities for all our client countries and their peoples. Funds. Those initiatives will help developing countries test In closing, I want to thank the dedicated staff of the World new approaches and pursue lower-carbon growth paths. Bank Group, in Washington and in offices in over one hundred In the Arab World, even those countries that are rich in other countries, who are committed to transforming us into a resources are facing demographic challenges, and they will more dynamic, flexible, and innovative institution. I also want need to find ways to generate jobs, broaden their growth, and to thank our Board of Directors, the Governors, and our many create hope. We have been advancing areas of cooperation, contributors and partners. To be most effective and success- including Islamic finance, water, and education. ful, we will need their ongoing help and counsel. We are also forming new partnerships, gaining knowledge and valuable experience, and leveraging the best global knowledge to support development. This involves focusing on serving our clients and ensuring that we are devoting attention Robert B. Zoellick 2 THE WORLD BANK ANNUAL REPORT 2008 THE BOARD OF EXECUTIVE DIRECTORS The Executive Directors are responsible for the conduct of the In fiscal 2008, Directors considered a variety of documents, Bank’s general operations; they perform their duties under including the fifth Global Monitoring Report, which reviewed powers delegated by the Board of Governors. As provided in progress toward the Millennium Development Goals (MDGs); the Articles of Agreement, 5 of the 24 Executive Directors are the framework for the Bank’s role in global public goods; a appointed by single-member countries having the largest document on strengthening the Bank’s engagement with IBRD number of shares; the rest are elected by the other member partner countries; a strategic framework on climate change countries, which form constituencies in an election process and economic development; and progress reports on the Bank conducted every two years. The resident Board of Executive Group’s plans for promoting clean energy, spurring progress Directors represents the evolving perspectives of member on Aid for Trade, and addressing food and energy prices. countries on the role of the Bank Group. Working jointly with the President of the World Bank in support The Board decides on IBRD loan and guarantee proposals of the Bank Group’s goal of inclusive and sustainable globalization, and on IDA credit, grant, and guarantee proposals made by the Board helped shape implementation of the six strategic the President. Directors shape policies that guide general themes presented at the 2007 Annual Meetings. The themes operations of the Bank and its strategic direction. They are focus on the poorest countries, particularly in Africa; fragile responsible for presenting to the Governors at the Annual and postconflict states; middle-income countries; global and Meetings audited accounts, an administrative budget, and the regional public goods; expanding opportunity for the Arab world; Annual Report on the operations and policies of the Bank, and and knowledge and learning. (See http://www.worldbank.org.) other matters that, in their judgment, require submission to During fiscal 2008, the Board approved the establishment of a the Governors. The Independent Evaluation Group (IEG), which State- and Peace-Building Fund. The Directors highlighted the reports to the Board, provides independent advice on the principles of transparency and internal governance, project relevance, sustainability, efficiency, and effectiveness of integrity, anticorruption efforts, and cooperation with partners. In operations. (See http://www.worldbank.org/boards and response to the food crisis, the Board approved the Framework http://www.worldbank.org/ieg.) for a Global Food Crisis Response Program (GFRP) and establish- Directors serve on one or more standing committees: ment of the Food Price Crisis Response (FPCR) Trust Fund and Audit, Budget, Committee on Development Effectiveness, the proposed transfer out of IBRD’s surplus to the FPCR Trust Ethics, Governance and Administrative Matters, and Fund. Following the External Review Committee on Bank-IMF Personnel. With the committees’ help, the Board discharges collaboration, Directors considered the Joint Management its oversight responsibilities through in-depth examinations Action Plan, which provides a roadmap for effective collabo- of policies and practices. The Executive Directors’ Steering ration by the Bretton Woods institutions to ensure consistent Committee, an informal advisory body, meets regularly. policy advice to member countries. During fiscal 2008, Directors Directors play an active role in preparing agendas and visited Ethiopia, India, Madagascar, Malawi, Maldives, Mongolia, issue papers for the semiannual meetings of the joint World Nepal, the Philippines, Tunisia, and the Republic of Yemen to Bank–International Monetary Fund Development Committee. assess project implementation firsthand. From left to right: (standing) Gino Alzetta, Svein Aass, Giovanni Majnoni, Herman Wijffels, Alexey Kvasov, James Hagan, Sid Ahmed Dib, Michael Hofmann, Masato Kanda, Mohamed Kamel Amr, E. Whitney Debevoise, Ambroise Fayolle, Michel Mordasini, Samy Watson, Felix Alberto Camarasa; (seated) Dhanendra Kumar, Abdulrahman Almofadhi, Zou Jiayi, Mat Aron Deraman, Caroline Sergeant, Jorge Humberto Botero, Mulu Ketsela, Louis Philippe Ong Seng. Not pictured: Jorge Familiar. THE WORLD BANK ANNUAL REPORT 2008 3 COUNTRY PROGRAMS OVERSIGHT AND FIDUCIARY RESPONSIBILITY During fiscal 2008, the Board considered 49 Country Assistance The Board exercises oversight and fiduciary responsibilities, in Strategy (CAS) products. Of these, 12 were prepared with IFC, part through its Audit Committee, which has a mandate to assist and several were prepared collaboratively with other donors. in overseeing and making decisions about the Bank Group’s financial condition, its risk management and assessment POVERTY REDUCTION processes, the adequacy of its governance and controls, and its The Board’s work on poverty reduction continued to be heavily reporting and accounting policies and procedures. This year the influenced by its determination to accelerate progress toward Board addressed significant reform and strengthening of the halving world poverty by 2015. It noted with concern that Bank Group’s oversight and supporting systems. These included progress continued to be uneven across countries and sectors, changes to the Department of Institutional Integrity, the Office of and stressed the importance of sharpening the focus on the Ethics and Business Conduct, and several components of the links needed to achieve the MDGs; coordinating donor support Conflict Resolution System, and the introduction of a Whistle- to ensure predictability of aid flows; supporting country training, Blower Policy for protected disclosures. institutional capacity building, and the results agenda; and addressing issues to help the Bank Group meet Paris ADMINISTRATIVE BUDGET Declaration on Aid objectives. Poverty Reduction Strategy The total budget for fiscal 2008 was $2,148.3 million, net of Papers (PRSPs) lay out a country’s own poverty reduction reimbursements, including $175.5 million for the Development strategy (PRS) and specify the policies, programs, and Grant Facility and the Institutional Grant Programs. The net resources needed to achieve development and poverty budget of $1,637.1 million represented a 2.9 percent increase reduction goals. PRSPs describe the country’s macroeco- over fiscal 2007. The Board approved a budget, net of reim- nomic, structural, and social policies and programs over the bursements, of $2,179.1 million for fiscal 2009. medium to long term, as well as associated financing. PRSPs and annual progress reports are country owned, and thus INSPECTION PANEL are discussed, but not approved, by the Board and the IMF. In The Inspection Panel provides a vehicle for private citizens, fiscal 2008, 29 PRSP products were discussed. Africa accounted especially poor people, to bring claims to the Bank’s Board, for 16 PRSP products; followed by Europe and Central Asia, which decides, on the recommendation of the panel, whether to and Latin America and the Caribbean, with 4 each; 3 in South launch an investigation. This process has given voice to people Asia; and 2 in East Asia and Pacific. who may have been adversely affected by Bank-financed projects. In fiscal 2008, the Inspection Panel received six requests for IDA15 inspection involving Bank projects, five of which were regis- Donor countries pledged a record $25.2 billion for the tered. The panel recommended investigations in three cases. World Bank to help overcome poverty in the poorest (See http://www.worldbank.org/inspectionpanel.) countries. In total the 15th Replenishment of IDA (IDA15) will provide $41.7 billion, an increase of $9.5 billion over A GLOBAL WORKFORCE IDA14, the largest expansion in donor funding in IDA’s A global community, the Bank staff represents 161 countries. history. The work of IBRD and IDA is performed by about 8,600 people The Executive Directors’ Advisers, the IDA Deputies, played working in Washington, DC, and in almost 120 country offices noteworthy roles in the IDA discussion preparations, and worldwide. Today 36 percent of staff work in country offices. numerous Directors and their staffs participated in the IDA Staff diversity is critical to the Bank’s organizational Deputies’ five replenishment meetings. effectiveness. In 2007, the Bank Group adopted a five-year The Board was pleased to endorse this most successful Diversity & Inclusion Strategy for staff, emphasizing four key IDA15 in February 2008. It reiterated the importance of IDA’s role themes—the role of leadership; more inclusive staffing in building government capacity to design appropriate debt processes; new learning to promote behavior change; and management strategies and improve debt management. The fresh metrics that focus on developing-country nationals, Board also reviewed one Heavily Indebted Poor Countries (HIPC) gender, and Sub-Saharan African and Caribbean nationals. Completion Point document, one Preliminary HIPC document, The Bank Group’s agenda supports staff with disabilities and three HIPC Decision Point documents, and one Interim Debt those of any sexual orientation. Relief document. For more on diversity and decentralization, see the CD-ROM. 4 THE WORLD BANK ANNUAL REPORT 2008 EXECUTIVE DIRECTORS, ALTERNATES, AND COMMITTEE MEMBERSHIP | JUNE 30, 2008 EXECUTIVE DIRECTOR ALTERNATE CASTING VOTES OF APPOINTED E. Whitney Debevoisea, e Ana Guevara United States Toru Shikibub, c, i Masato Kanda Japan Michael Hofmannd Ruediger Von Kleist Germany Alex Gibbsb, e Caroline Sergeant United Kingdom Ambroise Fayollea, d Alexis Kohlerh France ELECTED Gino Alzettad(C) Melih Nemli Austria, Belarus, Belgium, Czech Republic, Hungary, Kazakhstan, Luxembourg, Slovak (Belgium) (Turkey) Republic, Slovenia, Turkey Jorge Familiar c, e, i Jose Alejandro Rojas Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Spain, Venezuela (Mexico) Ramirezh (República Bolivariana de) (República Bolivariana de Venezuela) Herman Wijffelsa(VC), c, i(VC) Claudiu Doltuh Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Georgia, Israel, Macedonia (Netherlands) (Romania) (former Yugoslav Republic of), Moldova, Netherlands, Romania, Ukraine Samy Watsonb, c Ishmael Lightbourne Antigua and Barbuda, The Bahamas, Barbados, Belize, Canada, Dominica, Grenada, (Canada) (The Bahamas) Guyana, Ireland, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines Rogerio Studartb, d Jorge Humberto Boteroh Brazil, Colombia, Dominican Republic, Ecuador, Haiti, Panama, Philippines, Trinidad (Brazil) (Colombia) and Tobago Giovanni Majnonia, c(VC) Nuno Mota Pintoh Albania, Greece, Italy, Malta, Portugal, San Marino, Timor-Leste (Italy) (Portugal) James Hagana, c Do Hyeong Kimh Australia, Cambodia, Kiribati, Korea (Republic of), Marshall Islands, Micronesia (Australia) (Republic of Korea) (Federated States of), Mongolia, New Zealand, Palau, Papua New Guinea, Samoa, Solomon Islands, Vanuatu Dhanendra Kumar d, e(VC) Zakir Ahmed Khanh Bangladesh, Bhutan, India, Sri Lanka (India) (Bangladesh) Mulu Ketselaa, c, i(C) Mathias Sinamenye Angola, Botswana, Burundi, Ethiopia, The Gambia, Kenya, Lesotho, Liberia, Malawi, (Ethiopia) (Burundi) Mozambique, Namibia, Nigeria, Seychelles, Sierra Leone, South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe Svein Aasse(C) Jens Haarlovh Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, Sweden (Norway) (Denmark) Javed Talatb, d Sid Ahmed Dib Afghanistan, Algeria, Ghana, Iran (Islamic Republic of), Morocco, Pakistan, Tunisia (Pakistan) (Algeria) Michel Mordasinib(C), f Jakub Karnowskih Azerbaijan, Kyrgyz Republic, Poland, Serbia, Switzerland, Tajikistan, Turkmenistan, (Switzerland) (Poland) Uzbekistan Merza H. Hasana, e, i Mohamed Kamel Amr Bahrain, Egypt (Arab Republic of), Iraq, Jordan, Kuwait, Lebanon, Libya, Maldives, Oman, (Kuwait) (Arab Republic of Egypt) Qatar, Syrian Arab Republic, United Arab Emirates, Yemen (Republic of) Zou Jiayic(C) Yang Yingming China (China) (China) Abdulrahman Almofadhia(C) Abdulhamid Alkhalifa Saudi Arabia (Saudi Arabia) (Saudi Arabia) Alexey Kvasov Eugene Miagkov Russian Federation (Russian Federation) (Russian Federation) Mat Aron Deramanb, d Chularat Suteethornh Brunei Darussalam, Fiji, Indonesia, Lao People’s Democratic Republic, Malaysia, (Malaysia) (Thailand) Myanmar, Nepal, Singapore, Thailand, Tonga, Vietnam Felix Alberto Camarasad, e Francisco Bernasconih Argentina, Bolivia, Chile, Paraguay, Peru, Uruguay (Argentina) (Chile) Louis Philippe Ong Sengb(VC), e, f Agapito Mendes Diash Benin, Burkina Faso, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, (Mauritius) (São Tomé and Principe) Congo (Democratic Republic of), Congo (Republic of), Côte d’Ivoire, Djibouti, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Madagascar, Mali, Mauritania, Mauritius, Niger, Rwanda, São Tomé and Principe, Senegal, Togo Committees a. Audit Committee f. Pension Benefits and Administrative Committee C = Chairman b. Budget Committee g. Pension Finance VC = Vice Chairman c. Committee on Development Effectiveness h. CODE Subcommittee d. Personnel Committee i. Ethics Committee e. Committee on Governance and Executive Directors’ Administrative Matters THE WORLD BANK ANNUAL REPORT 2008 5 REMUNERATION OF EXECUTIVE MANAGEMENT, EXECUTIVE DIRECTORS, AND STAFF To recruit and retain highly qualified staff, the World Bank Group has developed a compensation and benefits system designed to be internationally competitive, to reward performance, and to take into account the special needs of a multinational and largely expatriate staff. The Bank Group’s staff salary structure is reviewed annually by the Executive Directors and, if war- ranted, is adjusted on the basis of a comparison with salaries paid by private financial and industrial firms and by representative public sector agencies in the U.S. market. After analyses of updated comparator salaries, the Board approved an average increase in the salary structure of 3.5 percent for fiscal 2008, effective July 1, 2007, for Washington-appointed staff. The annual salaries (net of taxes) of executive management of the World Bank Group were as follows for the period July 1, 2007, through June 30, 2008: Executive Management: Annual Salaries (Net of Taxes, in US$) ANNUAL BANK ANNUAL BANK GROUP GROUP CONTRIBUTION CONTRIBUTION TO NAME AND POSITION ANNUAL NET SALARYa TO PENSION PLANb OTHER BENEFITSc d Robert B. Zoellick, President 420,930 87,133 182,687 Graeme Wheeler, Managing Director 334,990 100,631h 85,422 Vincenzo La Via, Chief Financial Officer 334,990 69,343 74,033 Lars Thunell, Executive Vice President, IFC 334,990 69,343 74,033 Juan Jose Daboub, Managing Director 334,990 69,343 74,033 Ngozi N. Okonjo-Iweala, Managing Director e 334,990 100,631h 74,033 Vinod Thomas, Director General, IEG 306,640 92,115h 78,193 Marwan Muasher, Senior Vice President, External Affairs 304,440 63,019 67,281 Ana Palacio, Senior VP and World Bank Group General Counself 304,440 63,019 67,281 Yukiko Omura, Executive Vice President, MIGA 269,740 55,836 68,784 Executive Directorsg 219,800 n.a. n.a. Alternate Executive Directorsg 190,140 n.a. n.a. a. Because World Bank Group (WBG) staff, other than U.S. citizens, usually are not required to pay income taxes on their WBG compensation, the salaries are set on a net-of-tax basis. b. Approximate WBG contribution made to the Staff Retirement Plan and deferred compensation plans from July 1, 2007, through July 1, 2008. c. Other benefits include annual leave; medical, life, and disability insurance; accrued termination benefits; and other nonsalary benefits. d. Mr. Zoellick receives a supplemental allowance of $75,350 to cover expenses as part of WBG contribution to other benefits. Because Mr. Zoellick is a U.S. citizen, his salary is taxable and he receives a tax allowance to cover the estimated taxes on his Bank salary and benefits. In addition to his pension, Mr. Zoellick receives a supplemental retirement benefit equal to 5 percent of annual salary. e. Ms. Okonjo-Iweala’s appointment was effective December 3, 2007, and her actual salary for December 3, 2007, through June 30, 2008, was $193,652. The WBG contributed approximately $58,014 to her pension and $42,680 to other benefits for the portion of the year she worked. f. Ms. Palacio terminated her service on April 15, 2008, and her actual salary for the period June 30, 2007, through April 15, 2008, was $239,989. The WBG contributed approximately $49,933 to her pension and $53,310 to other benefits for the portion of the year she worked for the WBG. g. These figures do not apply to the U.S. Executive Director and Alternate Executive Director, who are subject to U.S. congressional salary caps. h. Pension benefits for these staff members are based on Staff Retirement Plan (SRP) provisions in effect prior to April 15, 1998. Staff Salary Structure (Washington, DC) During the period July 1, 2007, to June 30, 2008, the salary structure (net of tax) and average salaries and benefits for World Bank Group staff were as follows: STAFF AT MARKET GRADE AVERAGE AVERAGE GRADE REPRESENTATIVE JOB TITLES MINIMUM ($) REFERENCE ($) MAXIMUM ($) LEVEL (%) SALARY/GRADE BENEFITSa GA Office assistant 23,760 30,880 40,130 0.1 28,158 14,761 GB Team assistant, information technician 29,620 38,510 53,910 1.1 39,207 20,596 GC Program assistant, information assistant 35,550 46,220 64,720 11.6 49,821 26,188 GD Senior program assistant, information 41,790 54,320 76,050 9.5 60,563 31,898 specialist, budget assistant GE Analyst 55,660 72,350 101,280 9.9 70,967 37,416 GF Professional 74,750 97,170 136,040 18.0 91,250 48,165 GG Senior professional 99,020 128,730 180,220 29.6 125,937 66,581 GH Manager, lead professional 136,270 177,170 239,000 16.9 172,926 91,973 GI Director, senior advisor 188,000 245,000 282,000 2.8 226,384 120,211 GJ Vice president 244,540 273,880 314,970 0.3 277,483 145,456 GK Managing director, Executive vice president 268,580 304,580 334,990 0.1 317,652 149,597 Note: Because World Bank Group (WBG) staff, other than U.S. citizens, usually are not required to pay income taxes on their WBG compensation, the salaries are set on a net-of-tax basis, which is generally equivalent to the after-tax take-home pay of the employees of the comparator organizations and firms from which WBG salaries are derived. Only a relatively small minority of staff will reach the upper third of the salary range. a. Includes annual leave; medical, life, and disability insurance; accrued termination benefits; and other nonsalary benefits. 6 THE WORLD BANK ANNUAL REPORT 2008 WORLD BANK GROUP FISCAL YEAR HIGHLIGHTS Innovation and partnership bond the five institutions of the COLLABORATING TO ADVANCE World Bank Group (see page 9): the International Bank for AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION Reconstruction and Development (IBRD) and the International The World Bank, IFC, and MIGA work together and inde- Development Association (IDA), which together form the pendently to eliminate poverty, foster growth, and ensure World Bank; the International Finance Corporation (IFC); the that development is inclusive and sustainable. Joint Multilateral Investment Guarantee Agency (MIGA); and the ventures that mitigate or design solutions for today’s International Centre for Settlement of Investment Disputes most pressing issues—the struggle with rising food prices, (ICSID). The World Bank Group is one of the world’s largest the impact of greenhouse gas emissions, and the battle sources of funding and knowledge for developing countries. It against communicable diseases such as HIV/AIDS and uses financial resources and extensive experience to help malaria—are especially rewarding and serve as a model poor nations reduce poverty, increase economic growth, and of cooperation. improve the quality of life. The recipients of the World Bank Group’s fiscal 2008 financial The World Bank Group’s work focuses on achievement of commitments are using the funds in more than 670 projects, the eight Millennium Development Goals (see sidebar, page 13). many of them collaborative efforts of two or more of the affili- The goals call for eliminating poverty and achieving inclusive ates. The projects are designed to overcome poverty and and sustainable globalization. The MDGs lay out a blueprint enhance growth by improving education and health services, for the World Bank Group, setting its priorities and measuring promoting private sector development, building infrastructure, its results. The World Bank is the world’s largest funder of and strengthening governance and institutions. They are education; the world’s largest external funder of the fight practical plans to help developing countries move from poverty against HIV/AIDS; a leader in the fight against corruption and become more competitive in a globalizing world. worldwide; a strong supporter of debt relief; and the largest IFC contributed a $500 million grant to IDA in fiscal 2008 international financier of biodiversity, water supply, and as part of an indicative program for grants to IDA15 of up to sanitation projects. $1.8 billion. A new IDA-IFC secretariat has been established to identify and pursue opportunities for increasing joint Bank WORLD BANK GROUP ASSISTANCE Group efforts that support private sector development in the During fiscal 2008, the World Bank committed $24.7 billion in countries IDA serves. While IDA will continue to focus on loans, credits, and grants to its member countries. IDA com- the public sector, it can now draw more readily on IFC’s mitments, to the world’s poorest countries, were $11.2 billion, expertise to ensure the private sector does its part to 5 percent lower than the previous year. IBRD commitments improve lives in IDA countries. in fiscal 2008 totaled $13.5 billion, 5 percent higher than the Bank Group coordination is also evident where private previous year. IFC committed $11.4 billion for its own account investment and public policy are closely interconnected. IFC and mobilized an additional $4.8 billion for 372 private sector and IBRD have joint departments covering several aspects investments in developing countries, more than 40 percent of of private investment and the government activities that which were in IDA countries. MIGA issued close to $2.1 billion enable it. Joint industry departments focus on information in guarantees in support of investments in the developing and communication technologies; oil, gas, mining, and world, an increase of $730 million over fiscal 2007. Of the chemicals; and subnational finance, principally for infra- total, $690 million went to IDA-eligible countries. structure. IFC and IBRD also collaborate in advising on Africa received the highest Bank Group support, at more than small and medium enterprises, capital markets, and $7.2 billion in loans, grants, equity investments, and guarantees, corporate governance. which is a record for the region. THE WORLD BANK ANNUAL REPORT 2008 7 Joint efforts to improve the investment climate in develop- $70.7 million in long-term financing. The cable is expected to ing countries include the annual IFC-Bank publication Doing reduce the cost of the area’s broadband services, currently Business, which compares 178 economies on the ease of among the highest in the world, and to stimulate development starting and running a business. IBRD, IFC, and MIGA of new knowledge-based industries, call centers, and similar collaborate through the Foreign Investment Advisory Service, ventures. a multidonor service that advises developing and transition Another joint initiative is the Bujagali Hydropower Project, governments on ways to improve their investment climates. designed to alleviate a severe power shortage in Uganda that The Bank Group is also preparing a Strategic Framework daily affects the lives and livelihoods of millions. The largest on Climate Change and Development—a plan for integrating independent power project in Africa, the plant will generate climate change and development challenges without compro- electricity by recycling water released from nearby hydropower mising growth and poverty reduction efforts. The framework facilities. The financing package includes a $130 million IFC will include priorities, approaches, and a road map for action loan, a partial risk guarantee of up to $115 million from in helping countries mitigate or adapt to climate change. IDA, and an investment guarantee of up to $115 million from In addition, the Bank Group has set a goal of scaling up its MIGA. Seven other development finance institutions are portfolio of investments in renewable energy and energy supporting the project in recognition of its expected develop- efficiency projects by an annual average of 20 percent ment impact. through 2010. The Global Emerging Markets Local Currency (Gemloc) The World Bank Group also has a shared commitment to bond program is an innovative effort through which the Bank results-oriented development, through the Independent Group promotes local currency bond markets using market- Evaluation Group (IEG), which assesses the relevance, efficacy, based incentives. Gemloc was designed in response to and efficiency of Bank Group programs and their contribution numerous governments that wanted to strengthen their bond to development effectiveness. IEG has evaluation units at the markets and better support economic growth with stability. World Bank, IFC, and MIGA, which independently evaluate Under the program, PIMCO, a leading private investment their respective institutions’ financial and advisory services manager, is developing investment strategies for local bonds. operations with a particular focus on accountability. Markit, a private sector index company, has collaborated with The Bank Group increasingly undertakes innovative joint IFC to create a new, transparent bond index, and the World initiatives. One of the farthest-reaching is a regional integra- Bank is providing advisory services to strengthen local tion assistance strategy for Sub-Saharan Africa that seeks to markets, improve their “investability,” and attract more strengthen collaboration among the region’s countries with a foreign and domestic investors. focus on cross-border challenges: infrastructure; economic A $1 billion rehabilitation and expansion of the Queen Alia cooperation and harmonization; and regional approaches for International Airport in Amman represents the largest private addressing climate change, agricultural productivity, shared investment in Jordan’s history and illustrates the way the water resources, and health. Bank Group links its advisory and investment work. IFC One key project is a fiber-optic cable that will connect 21 advised the government on the competitive bidding process East African countries to each other and the rest of the world and more recently helped mobilize funding for the project with high-quality broadband Internet access and international through a syndication that attracted six European and Middle communications services. Widely considered a model for Eastern banks. The World Bank and the Islamic Development cooperation among major development finance institutions, Bank also provided significant funding. the East African Submarine Cable System has raised a total of 8 THE WORLD BANK ANNUAL REPORT 2008 THE WORLD BANK GROUP INSTITUTIONS The International Bank for Reconstruction and Development Established 1944 | 185 Members (IBRD) lends to governments of middle-income and creditworthy Cumulative lending: $446 billion* low-income countries. This affiliate promotes sustainable Fiscal 2008 lending: $13.5 billion for development through loans, guarantees, risk-management 99 new operations in 34 countries products, and nonlending analytical and advisory services. IBRD’s financial strength enables it to borrow in capital markets at low cost and to offer clients favorable borrowing * Effective fiscal 2005, includes guarantees. terms. IBRD KEY FINANCIAL INDICATORS | FISCAL 2004–2008 MILLIONS OF DOLLARS 2004 2005 2006 2007 2008 Operating incomea 1,696 1,320 1,740 1,659 2,271 Loans outstanding 109,610 104,401 103,004 97,805 99,050 Total assets 228,910 222,008 212,326 208,030 233,599 Total equity 35,463 38,588 36,474 39,926 41,548 a. Reported in IBRD’s financial statements as net income before Board of Governors–approved transfers and net unrealized gains (losses) on nontrading derivatives, loans, and borrowings measured at fair value, per Financial Accounting Standard No. 133 as amended. The International Development Association (IDA) provides Established 1960 | 167 Members interest-free, long-term loans—called credits—and grants to Cumulative commitments: $193 billion* governments of the world’s 82 poorest countries, which have Fiscal 2008 commitments: $11.2 billion little or no capacity to borrow on market terms. IDA’s lending for 199 new operations in 72 countries is financed by contributions to IDA from donor countries, IBRD’s net income transfers, grants from IFC, and IDA’s credit reflows. (For information about the 15th Replenishment of * Effective fiscal 2005, includes guarantees. IDA, see page 4.) IDA KEY FINANCIAL INDICATORS | FISCAL 2004–2008 MILLIONS OF DOLLARS 2004 2005 2006 2007 2008 Operating income (loss) (1,684) (986) (2,043) (2,075) 1,818 Development credits outstanding 115,743 120,907 127,028 102,457 113,542 Total development resources/Equity a 127,930 130,378 102,871 110,212b 123,619 a. Up to the fiscal year ended June 30, 2007, IDA prepared special-purpose financial statements. Effective July 1, 2007, IDA’s financial statements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP). Going forward, this line will report IDA’s equity as determined under U.S. GAAP, and the June 30, 2007, amount has been restated accordingly. b. As restated. THE WORLD BANK ANNUAL REPORT 2008 9 The International Finance Corporation (IFC) provides long- Established 1956 | 179 Members term loans, equity, structured and securitized products, and Committed portfolio: $32.2 billion (IFC’s account), advisory and risk mitigation services to private enterprises in plus $7.5 billion in syndicated loans developing and transition countries, helping reduce poverty Fiscal 2008 commitments: $11.4 billion and improve people’s lives. IFC seeks to reach businesses in committed and $4.8 billion mobilized for regions and countries with limited access to capital and 372 projects in 85 countries markets that are considered too risky by commercial inves- tors in the absence of IFC participation. IFC provides services without accepting government guarantees. IFC KEY FINANCIAL INDICATORS | FISCAL 2004–2008 MILLIONS OF DOLLARS 2004 2005b 2006b 2007b 2008 a Operating income 982 1,953 1,409 2,589 1,438 Liquid assets net of associated derivatives 13,055 13,325 12,730 13,269 14,622 Loans, equity investments, and debt securities, net 10,279 11,489 12,787 15,796 23,319 Total capital 7,782 9,821 11,141 14,017 18,261 a. Effective 2005, income after expenditures for advisory services, performance-based grants, and grants to IDA and before net unrealized gains (losses) on other nontrading financial instruments. b. As restated. The Multilateral Investment Guarantee Agency (MIGA) Established 1988 | 172 Members provides political risk insurance or guarantees to promote Cumulative guarantees issued: $19.5 billion* foreign direct investment into developing countries. MIGA also Fiscal 2008 guarantees issued: $2.1 billion works to resolve disputes between investors and host govern- ments to keep guaranteed investments, and their benefits, on *Includes amounts leveraged through the Cooperative Underwriting Program. track. The agency’s knowledge sharing and technical assist- ance activities help countries define and implement strategies to promote investment, and provide information on business opportunities, investment climate conditions, and political risk insurance. MIGA KEY FINANCIAL INDICATORS | FISCAL 2004–2008 MILLIONS OF DOLLARS 2004 2005 2006 2007 2008 Operating income 26 24 17 49 55 Operating capitala 811 830 863 950 1,019 Net exposure 3,259 3,138 3,310 3,209 3,578 Net exposure in IDA-eligible countries 1,139 1,341 1,435 1,411 1,477 a. Operating capital includes paid-in capital, retained earnings, and the insurance portfolio reserve net of corresponding reinsurance recoverable. The International Centre for Settlement of Investment Established 1966 | 144 Members Disputes (ICSID) provides facilities for conciliation and arbitra- Total cases registered | 268 tion of international investment disputes between foreign Fiscal 2008 cases registered | 32 investors and host states. As evidenced by its large member- ship, considerable caseload, and the numerous references to its arbitration facilities in investment treaties and laws, ICSID plays an important role in the field of international investment and economic development. ICSID also conducts research and publishing activities in the areas of international arbitration and foreign investment law. 10 THE WORLD BANK ANNUAL REPORT 2008 AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION 1 On a radio show in Côte d’Ivoire, refugees from Conakry, Guinea, discuss the challenges they face. OVERCOMING CHALLENGES malaria being the most critical, continue to challenge us. The AND CREATING OPPORTUNITIES World Bank, in collaboration with its member countries and A year that saw soaring food and commodity prices reaffirmed international partners, is making progress in the face of these the role the World Bank plays in international economic challenges. development and poverty reduction worldwide. The Bank’s It is projected that the increase in the gross domestic achievements over the past year illustrate its ability to tackle product (GDP) for developing countries will decline to 7.1 percent global crises and support sustainable growth with care for in 2008, whereas high-income countries are predicted to grow the environment in its client countries while safeguarding by a modest 2.2 percent. Globally, poverty is in decline, and improving people’s health, education, and other human exemplified by East Asia, where the Millennium Development development outcomes. The Bank collaborates with numer- Goal (MDG) of halving extreme poverty by 2015 from 1990 ous other multilateral organizations and partners to realize levels already has been achieved. Progress on poverty the most far-reaching results possible. reduction and the other MDGs varies widely, however, and Much needs to be done without delay to alleviate global conditions are especially dire in Africa, where extreme poverty crises. An estimated 2.5 billion people are trying to survive is expected to grow. Africa, especially its Sub-Saharan on $2 or less a day. The slide of the U.S. dollar and resulting nations, is the Bank’s priority continent for action. weakening economy, together with the credit crunch, have led The International Development Association is the Bank’s to a global financial crisis, which has clearly and significantly arm for supporting the world’s poorest countries in their put added stress on the poorest people. Skyrocketing food efforts to boost economic growth, lower poverty, and improve prices are a harsh reality, resulting in even greater hunger people’s living conditions. It is the largest multilateral channel and malnutrition worldwide. The World Bank responded in for providing concessional financing to countries with low per May 2008 with a rapid financing facility for the food crisis, capita income, with a special emphasis on Sub-Saharan addressing immediate needs with immediate action. Swift Africa. For the 15th Replenishment of IDA (IDA15), 45 donor needs assessments were undertaken in the field with the countries pledged a record $25.2 billion in December 2007 World Food Program, the Food and Agriculture Organization, to further the cause of overcoming poverty in the poorest of and the International Fund for Agricultural Development. The the low-income countries around the world. In total, IDA15 first grants under the facility were approved for Djibouti will provide $41.7 billion, an increase of 30 percent over the ($5 million), Haiti ($10 million), and Liberia ($10 million). IDA14 replenishment. This is the greatest expansion in donor Other commodity costs continue to climb, with the potential funding in the history of IDA. The World Bank Group pledged to make the most basic necessities inaccessible for many. a record $3.5 billion transfer to IDA from IBRD’s net income Climate change threatens agricultural productivity and ($1.8 billion) and designations of IFC’s retained earnings for consequently the world’s food supply as well as the income grants to IDA of up to $1.8 billion. Today the World Bank is of most of the poorest people. Natural catastrophes, such in a strong position, with unprecedented funding, to move as this year’s earthquake in China and cyclone in Myanmar, further toward achieving the Millennium Development devastate millions who may not survive without immediate Goals, chief among them, eradication of extreme poverty disaster relief. Communicable diseases, with HIV/AIDS and and hunger. 12 THE WORLD BANK ANNUAL REPORT 2008 This Annual Report details the numerous activities the in lending; and global issues, including commodity prices, World Bank has pursued in the past fiscal year in the fight climate change, governance and anticorruption, and against poverty, concentrating on three major areas: gender. the Bank’s agenda for low-income countries, including countering the effects of rising food prices and increasing REDUCING POVERTY AND INEQUALITY lending in agriculture and rural development; middle- At the heart of the World Bank’s work is its focus on poverty income country initiatives, such as the Economic Research reduction and inclusive growth. Despite progress achieved Forum in the Middle East and the Bank’s recent innovations over the past few years, about 1 billion people—15 percent of MIDPOINT PROGRESS TOWARD THE MILLENNIUM DEVELOPMENT GOALS Many achievements have brought the MDG targets for 2015 within reach in Africa. An estimated 10 million-plus children under five died in 2005; some cases. For the goals to be realized, six criteria must be met: stronger most of their deaths were from preventable causes. and more inclusive growth in Africa and fragile states, more effort in health 5. Improve Maternal Health and education, integration of the development and environment agendas, Almost all of the half million women who die during pregnancy or more and better aid, movement on trade negotiations, and stronger and childbirth every year live in Sub-Saharan Africa and Asia. There are more focused support from multilateral institutions like the World Bank. numerous causes of maternal death that require a variety of health care 1. Eradicate Extreme Poverty and Hunger interventions to be made widely accessible. From 1990 through 2004, the proportion of people living in extreme 6. Combat HIV/AIDS, Malaria, and Other Diseases poverty fell from almost a third to less than a fifth. Although results vary Annual numbers of new HIV infections and AIDS deaths have fallen, widely within regions and countries, the trend indicates that the world but the number of people living with HIV continues to grow. In the as a whole can meet the goal of halving the percentage of people living eight worst-hit southern African countries, prevalence is above in poverty. Africa’s poverty, however, is expected to rise, and most of the 15 percent. Treatment has increased globally, but still meets 36 countries where 90 percent of the world’s undernourished children only 30 percent of needs (with wide variations across countries). live are in Africa. Less than a quarter of countries are on track for AIDS remains the leading cause of death in Sub-Saharan Africa achieving the goal of halving undernutrition. (1.6 million deaths in 2007). There are 300 to 500 million cases of 2. Achieve Universal Primary Education malaria each year, leading to more than 1 million deaths. Nearly The number of children in school in developing countries increased all the cases and more than 95 percent of the deaths occur in from 80 percent in 1991 to 88 percent in 2005. Still, about 72 million Sub-Saharan Africa. children of primary school age, 57 percent of them girls, were not 7. Ensure Environmental Sustainability being educated as of 2005. Deforestation remains a critical problem, particularly in regions of 3. Promote Gender Equality and Empower Women biological diversity, which continues to decline. Greenhouse gas The tide is turning slowly for women in the labor market, yet far more emissions are increasing faster than energy technology advancement. women than men—worldwide more than 60 percent—are contributing but 8. Develop a Global Partnership for Development unpaid family workers. The World Bank Group Gender Action Plan was Donor countries have renewed their commitment. Donors have to fulfill created to advance women’s economic empowerment and promote their pledges to match the current rate of core program development. shared growth. Emphasis is being placed on the Bank Group’s collaboration with multilateral and local partners to quicken progress toward the MDGs’ 4. Reduce Child Mortality realization. There is some improvement in survival rates globally; accelerated improvements are needed most urgently in South Asia and Sub-Saharan (See http://www.developmentgoals.org.) AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION 13 the world’s population—still live on less than $1 a day, and years. Higher food prices may also heighten inequality within 2.5 billion live on less than $2 a day. countries, worsen malnutrition, and aggravate the vulnerability The poor typically lack access to education, adequate of people living with conflict, HIV, or drought conditions. health services, and clean water and sanitation. They are To help countries respond to this crisis, the Bank is working more vulnerable to economic shocks, natural disasters, closely with UN agencies on a common strategy, responding violence, and crime. The Bank continues to support country- in four main ways: with policy advice, expedited financing, owned development strategies that seek to reduce poverty by financial market insurance products, and research. The Bank expanding growth opportunities. It seeks to improve the ability of poor households to participate in the economy and to have better access to basic services. The Bank focuses on improv- ing infrastructure and risk management instruments and on creating more accountable and transparent institutions. Poverty Projections Recent estimates suggest that over the next decade the share of the population living in extreme poverty is expected to decline in all developing regions but by greatly varying degrees. By 2015, the share of the population in developing countries living on less than $1 a day will stand at 10 percent, down from 29 percent in 1990. The absolute number of people in extreme poverty globally is tentatively projected to fall from 1.2 billion in 1990 and 970 million in 2004 to 624 million in 2015. Although the decline in world poverty is a positive sign, poverty reduction has been highly uneven across regions. In East Asia the goal of halving extreme poverty has already been achieved: the percentage of people living on $1 a day is expected to drop to 2 percent (although the percentage of people living on $2 a day will account for a still significant 15 percent). At the other extreme is Sub-Saharan Africa. Despite a 4.7 percentage point decline in the share of people living in extreme poverty between 1999 and 2004, some 31 percent of Africa’s population will still be living on less than $1 a day by 2015—higher than the MDG target of 23 per- cent. There are some exceptions, however; countries such as Ghana, Mozambique, Tanzania, and Uganda are making solid progress toward the MDGs. The recent increase in food prices may set back recent gains in reducing poverty. Preliminary estimates from the World Bank indicate that the persistence of current food prices may well translate into losing almost seven years of progress in poverty reduction, with up to 105 million people in low-income countries pushed into poverty over the next three 14 THE WORLD BANK ANNUAL REPORT 2008 Local farmers attend a workshop on ecology and social organization in the Amazon region of Brazil. has launched the Global Food Crisis Response Program, a of the Doha agreement would improve the functioning of the facility providing up to $1.2 billion of accelerated financial multilateral trading system and help establish more efficient support and technical advice to especially vulnerable countries. and resilient agricultural and nonagricultural trade globally. It would reduce the distortions in agricultural trade created Employment and Inclusive Growth by decades of subsidies by developed countries and import Rising inequality over the 1990s has severely reduced the barriers by both developed and developing countries. The Doha potential impact on poverty from the rapid growth experi- agreement would increase incentives to invest in agricultural enced by many countries. On average, between 1990 and markets—including in low-income countries—and in the long 2004, only one-third of growth in output transferred to growth run would help reduce the chance of future global food price in employment. crises. Overall, the agreement would provide a more supportive Demographic trends suggest that the next decades will see international framework for developing countries, especially growing pressure to create employment opportunities in most the world’s poorest, as they seek to improve their trade perfor- low-income countries in response to a sustained growth in mance; integrate into the world economy; and achieve more labor supply that follows from continuing sharp increases rapid, sustainable, and inclusive economic growth. The Bank in the working-age population and in female labor market is scaling up its Aid for Trade activities to strengthen in-country participation. Sub-Saharan Africa will have to grow more than programs on trade and competitiveness. three times faster than projected simply to maintain current employment rates. Many of the poor are employed but earn a below-subsistence AGRICULTURE AND RURAL DEVELOPMENT living. Recent estimates suggest that over 500 million people Even before the rapid rise in food prices, the World Bank had (18 percent of the employed) are “working poor,” earning less sharpened its focus on the critical role that agriculture and than $2 a day—and this share is growing worldwide, with the rural development can play in helping people move out of exception of India and China. Thus, for growth to be inclusive, a poverty. Agriculture is critical because some 75 percent of the multipronged approach to create jobs in selected sectors while world’s poor live in rural areas, and the sector has a powerful enhancing the quality of employment, especially labor income, influence on economic growth, poverty reduction, and in others must be implemented. environmental sustainability. The World Development Report 2008: Agriculture for The Doha Round Development, released in October 2007, focuses on three key Despite the July 2008 failure of the Doha discussions, the sets of recommendations: increasing agricultural productiv- World Bank continues to support the completion of an ity, especially in Sub-Saharan Africa; shrinking growing ambitious Doha Round of trade talks. Successful conclusion income inequalities between rural and urban areas in more DEVELOPMENT MARKETPLACE The Development Marketplace program is a small-grants program that The 2008 global competition, devoted to sustainable agriculture for develop- identifies and funds innovative, early-stage projects with high potential for ment, attracted over 1,700 applicants. One hundred finalists from 42 countries development impact. It is supported by many organizations, chief among were selected by agriculture development experts from inside and outside them the Bill & Melinda Gates Foundation and the Global Environment the Bank Group. These finalists were invited to attend the Development Facility, and is administered by the Bank. Marketplace event at Bank headquarters September 24–26, 2008. At the event, 25–30 project leaders were selected to receive up to $200,000 each to The program’s merit-based competition attracts ideas from a range of implement their ideas over two years. The Bank will monitor implementation innovators, including civil society groups and businesses. Competitions and commission independent evaluations of the projects about 18 months are held annually at regional, country, and global levels. after they close. (See http://www.developmentmarketplace.org.) AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION 15 urbanized and middle-income countries; and contributing The assistance will be based on institutional research on to environmental sustainability everywhere. (See http://www conflict prevention and reconstruction as well as on studies of .worldbank.org/wdr2008.) links between peace- and state-building and governance. Consistent with the WDR message about the need for more and better investments in agriculture for development, the STRENGTHENING SUPPORT Bank is planning a major scale-up of lending in agriculture and FOR MIDDLE-INCOME COUNTRIES rural development in fiscal 2009, especially in Sub-Saharan Middle-income countries are critical to the Bank’s fight against Africa. Underperformance in agriculture has been a major global poverty, as they are home to nearly 70 percent of the limitation of Africa’s development, according to the Independent world’s poor (defined as people who earn less than $2 a day). Evaluation Group (IEG). For most of the past two decades, both governments and donors, including the World Bank, have neglected the sector. Lending from the Bank has been sprinkled across various agricultural activities such as research, extension, credit, seed provision, and policy reforms in rural space, but with insufficient recognition of the synergies among them. Drawing on its comparative advantage as a multisector lending institution and as the single largest donor to African agriculture, the Bank now has an opportunity to help ensure a coordinated and multifaceted approach to agriculture development in Africa. The Bank is working to align client priorities and harmo- nize partner efforts in agricultural initiatives. The Bank is supporting the African Union’s Comprehensive African Agricultural Development Plan as well as the Global Donor Platform for Rural Development, made up of 29 donor agencies active in agriculture and rural development. The Bank has also increased its dialogue and diagnostic studies with partners at the country level. ASSISTING FRAGILE AND CONFLICT-AFFECTED COUNTRIES Following the approval of a new Rapid Response to Crises and Emergencies policy in February 2007, the separate conflict and fragility agendas were merged with the creation of the Fragile and Conflict-Affected Countries Group in July 2007. The aim is to deliver effective programs, in collaboration with other partners, in support of sustainable growth and economic and social development, peace building, and sound governance. Although fragile states are not necessarily afflicted with conflict, and conflict-affected countries are not always hindered by fragile governance, troubling attributes exist in both. Hence, the Bank and some of its partners recognize the commonalities and believe that they should support these at-risk countries. 16 THE WORLD BANK ANNUAL REPORT 2008 Most of these countries face constraints in mobilizing the in emerging market countries. The Bank Group is also exploring funds needed to invest in infrastructure, health, education, other mechanisms for local currency lending and is considering and the reform of policies and institutions essential to innovative approaches for funding climate change and green improving the investment climate. Some middle-income initiatives. For example, Mexico signed the first climate change countries are able to borrow on foreign markets or access development policy loan in May 2008. risk management instruments, but often where these sources On the nonfinancial side, the Bank introduced simple of finance are available, the maturities are usually short and projects that can be easily replicated, mechanisms for the rates high. A few middle-income countries have achieved additional financing of successful projects, and revisions to investment-grade ratings. emergency and rapid response lending policies. The Bank has By implementing the strategy for middle-income countries been piloting the use of country systems, approved by the Board endorsed by the Development Committee in 2006, the Bank is in April 2008, for financial management and safeguards, and responding to continuing strong demand for both traditional it plans to pilot national procurement systems shortly. Up to and innovative products. Based on client demand in middle- 10 countries with a mix of income levels will participate in the income countries, this response could include requiring procurement pilot, with at least one pilot country in each governments to make substantial contributions to financing, region. The Bank is also trying to identify ways to streamline requiring payment for technical assistance and advisory its investment lending procedures so that it is more flexible services, and making Bank loans available to provincial and and better equipped to deliver its products under the Bank’s local governments. A task force, convened in fiscal 2008 to new business model for middle-income countries. (See build on the work started in 2006, identified four areas of http://www.worldbank.org/middleincomecountries.) emphasis: improving client responsiveness and flexibility; expanding the range and use of financial products; building HEALTH, EDUCATION, AND GENDER a dynamic organization leveraging Bank Group synergies; Complementing the Bank’s strategic investment in markets, and building knowledge to take on 21st century challenges, the human development agenda helps people in developing particularly through local partnerships and enhanced countries acquire the good health, education, and skills they South-South cooperation. need to succeed in the workplace, live better, and contribute The Bank has improved the delivery of customized devel- to national cohesion and economic growth. opment solutions by introducing a range of financial and nonfinancial innovations. On the financial side, during fiscal Health 2008, IBRD announced the biggest simplification of and In fiscal 2008, the Bank committed $948 million in its reduction in its loan pricing since the Asian financial crisis. continuing efforts to significantly improve health (See http://www.worldbank.org/ibrd.) outcomes, while also moving ahead to implement its Borrowers now have access to IBRD loans at longer Health, Nutrition, and Population (HNP) Strategy, “Healthy maturities and at prices that are lower and more transparent Development,” approved by the Board in April 2007. The than they had been. In response to demand for market-based strategy reinforces the Bank’s ultimate objective to instruments to address catastrophic risk, the Bank Group improve the state of people’s health, especially in poor and launched the Caribbean Catastrophic Risk Insurance Facility; vulnerable groups, under the aegis of its overall mission to it also enhanced existing contingent loan products to address reduce poverty and spur opportunity. The HNP strategy calls countries’ emergency liquidity needs following catastrophes and for the Bank to focus rigorously on its key strengths in other exogenous shocks. The IFC’s Global Index Reinsurance health systems–strengthening and health financing and Facility is in place, and the Bank Group initiated the Global economics, and also to help government leaders and the Emerging Markets Local Currency (Gemloc) bond program to international community to commit to achieving and help catalyze the development of local currency bond markets monitoring results. AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION 17 Progress was made in terms of knowledge development International Health Partnership (IHPϩ), led by the World and country-specific work in keeping with the strategy. In Health Organization and the Bank, is a new and crucial particular, budgets were approved to generate new knowledge development in this context. Since its initiation in 2007, this products, which focused on lessons learned from country partnership has grown to include 15 African and Asian experience on good practice in health-financing reform, countries and 10 major donor countries. IHPϩ seeks to governance mechanisms for mandatory health insurance, align donors with recipient country interests through analysis of restrictions and mechanism for overcoming mutual accountability in a concerted quest to attain the bottlenecks in the implementation of health strategies in health MDGs. low-income countries, and the initiation of work on human resource constraints and fiscal space for health. In addition, Education as a result of a highly generous contribution from Norway, The Bank provides about a fourth of global external funding a trust fund of $100 million was set up for results-based for education, making it the largest donor in the world in the financing in at least four low-income countries. sector. The Bank’s portfolio of education projects was $7.4 Implementation has also started at the regional level, billion by the end of fiscal 2008, funding 140 operations in 92 especially in Africa, in the areas of results-based financing, countries. New commitments accounted for 7.8 percent of human resources for health, and harmonization and total Bank lending. Over the past four years, its lending for alignment of donor aid. education has remained steady at about $2 billion a year, In addition, the Bank continued its work with client about half of it through IDA on concessionary terms. About countries and global and regional partners to prevent and 35 percent of all Bank aid for education in fiscal 2008 was treat communicable diseases, which are the leading killers provided through multisector investment projects and of children and adults in the developing world, claiming multisector development policy loans. more than 12 million lives a year. Although several poten- The Bank’s education sector completed several important tially deadly epidemics have been contained, HIV and others research studies in fiscal 2008. These studies—on linking remain threats. Dengue and yellow fever have reappeared; education policy to labor market outcomes; science, technology, tuberculosis killed 1.6 million people in 2005; and more and innovation; school-based management; and educational than 1 million people die of malaria every year, mostly assessment—amplified the connections among education, infants, young children, and pregnant women, and most empowerment, opportunity, and economic growth. of them in Africa. The current food crisis is derailing recent gains in reduc- ing malnutrition. Between 1990 and 2005, the share of Gender children under five with moderate and severe stunting fell During fiscal 2007, the Bank adopted an action plan to from 33.5 percent worldwide to 24.1 percent. While food empower women economically. Gender Equality as Smart prices are not the main driver of malnutrition, they do affect Economics was endorsed by the Group of Eight heads of state nutritional outcomes through their impact on real incomes in June 2007. In April 2008, the Bank announced six new and household purchasing behavior. commitments on gender equality, including improving the In addition to emphasizing a cross-sectoral approach for integration of gender equality into agriculture and rural achieving the health-related MDGs, the Bank is implementing development projects by 2010, channeling through IFC at the bold agenda of the Paris Declaration on Aid Effectiveness. least $100 million in credit lines at commercial banks for For example, the Health 8, an informal group of heads of women entrepreneurs by 2012, and increasing IDA invest- health-related organizations, was formed to amplify an ments for gender equality. urgent appeal to accelerate efforts to achieve the MDGs and Fiscal 2008 saw activities launched in all developing to share accountability for progress at the country level. The regions to promote investments to better integrate women 18 THE WORLD BANK ANNUAL REPORT 2008 into the economy by increasing their access to land, labor, essential infrastructure services, particularly transportation, credit, and product markets. These activities aim to promote water, and energy. women’s transition to good-quality employment; to increase The Bank launched a research program in fiscal 2008 as the number of women starting agribusinesses and engaging part of the Doing Business project on reforms that improve in high-value agriculture; and to boost women’s access to business opportunities for women. In partnership with the Nike Foundation, it began investigating ways to promote economic opportunity for adolescent girls by providing conditional cash transfers and skills training that matches labor market needs. Financial support from the governments of Australia, Canada, Denmark, Germany, Iceland, Norway, Spain, Sweden, and the United Kingdom and from the Nike Foundation continues to encourage innovation in mainstreaming gender issues in the Bank’s work. (See http://www.worldbank.org/gender.) Social Protection and Labor This sector helps client countries create good jobs, provide effective assistance programs for poor and vulnerable groups, and better manage risk. It focuses on six main areas: labor markets, pensions, social safety nets, social funds, vulnerable groups (such as the disabled and child workers), and social risk management. Through lending interventions and analytical work, the Bank is helping clients to improve the functioning of their labor markets and the creation of better jobs through im- proved regulations, active labor market programs, and unemployment benefit schemes. Its efforts are enhanced by a multidonor trust fund on employment creation, established at the end of calendar year 2007, which is closing knowledge gaps, supporting capacity building, and helping countries implement a multisector operations framework known as MILES (macroeconomics, investment climate, labor market institutions, education and skills, and social protection). (See http://www.worldbank.org/sp.) HARNESSING THE COMMODITIES BOOM FOR SUSTAINABLE DEVELOPMENT A commodities boom in oil, gas, and minerals in many parts of the developing world is opening opportunities for marshaling the resulting revenue windfalls for sustainable development. Commodity prices have fluctuated considerably AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION 19 A public works project in Ethiopia focuses on soil and water conservation to rehabilitate the land. since 2000; in the past year they had risen, in general, by mitigate the increase in greenhouse gas emissions and adapt more than 75 percent as compared with 2000 prices. Nearly to the risks and impacts posed by climate change. half of Sub-Saharan Africa’s population lives in countries The starting point for the Bank’s work is the recognition that are rich in oil, gas, or hard-mineral resources. The that climate change is more than an environmental challenge; challenge is to effectively channel the revenue into pro- it is also an economic, development, and investment challenge grams that fight poverty, hunger, malnutrition, illiteracy, that calls for urgent action. For many developing countries, the and disease. impact can be enormous: they stand to suffer the most from Transforming natural resource wealth into long-term climate change because of their geographic location and economic growth requires sound practices across a broad sensitivity to extreme weather events. In IDA-eligible coun- set of issues, including awarding and monitoring contracts; tries, for instance, 870,000 people have been killed and almost collecting revenue; managing the economy, including price 2.5 billion affected by climate-related disasters over the past volatility; and investing revenues effectively for national 25 years. Apart from the immediate drama of disaster, climate development. The Bank is creating a new partnership— change can reduce agricultural productivity, deplete already Extractive Industries Transparency Initiative Plus Plus scarce water resources, increase the incidence of devastating (EITIϩϩ)—with multilateral, bilateral, private sector, academic, vector-borne diseases such as malaria and dengue, and harm and civil society partners. This country-driven initiative will ecological systems and their biodiversity. provide technical assistance and build national capacity The Bank Group launched a series of global consulta- across the natural resources value chain. tions with stakeholders to help formulate a Strategic Even with efficient financial markets, a critical chal- Framework on Climate Change and Development by the lenge remains for many developing countries. One of the end of 2008. This framework will outline the organization’s cruel ironies today is the connection between rising energy integrated approach to the issue. The Bank had already and food prices. Higher energy prices have increased set goals for piloting adaptation instruments and reducing fertilizer and transport costs and stimulated biofuel greenhouse gas emissions by increasing lending for clean production. energy while also significantly increasing access to electric- Food and energy prices usually represent over 70 percent ity, particularly in Sub-Saharan Africa. Overall, Bank of the consumption basket of the poor. In the face of even lending for energy rose to $4.2 billion in fiscal 2008, and higher prices, poor households will cut back on food con- the share of low-carbon projects in the Bank’s energy sumption and education—and girls will invariably be the first portfolio grew to about 40 percent. Low-carbon growth withdrawn from schooling. Reliance on traditional fuels will country case studies were launched for Brazil, China, increase with damaging consequences to the environment. India, Indonesia, Mexico, and South Africa. In late 2007, the Board of Directors approved the creation of two new carbon finance facilities, the Forest Carbon Partnership Facility CLIMATE CHANGE and the Carbon Partnership Facility. These new facilities In line with the World Bank Group’s plan to ramp up work on complement the more than $2 billion allocated to 10 other climate change, the Bank significantly accelerated its efforts carbon funds and facilities the Bank currently manages. to help client countries cope with climate change while Sixteen governments and 66 private companies from respecting another aspect of its core mission: promoting various sectors have contributed to these funds. (See economic development and poverty reduction by helping http://www.worldbank.org/climatechange.) provide modern energy to growing economies. Drawing on The Independent Evaluation Group (IEG) assessed Bank more than a decade of experience in the field, the World Bank Group support for the environment to its clients in public and responded to increasing calls in the international community private sectors from 1990 through 2007. It found that this to work faster and do more to help developing countries support has increased significantly and performance has 20 THE WORLD BANK ANNUAL REPORT 2008 improved, especially since 2001, when the Bank Group’s first management, administrative and civil service, revenue explicit strategy for the environment was adopted. According administration, and anticorruption and transparency. It found to the IEG, an even greater effort is required, however, and a that among countries borrowing for public sector reform, number of key constraints still need to be overcome, including more than 80 percent of IBRD and 69 percent of IDA borrow- insufficient government commitment to environmental goals ers showed improved performance. IEG noted that bank and weak institutional capacity on the ground. The Bank lending for public sector reform was successful when Group also needs to update its environment strategy; further reform objectives were realistic and institutional capacity strengthen cross-sectoral collaboration; improve mecha- was considered. Moving forward, improvements in human nisms to monitor and assess environmental results and resource management reforms and the complex political impacts of its lending and nonlending services; and improve and sequencing issues of reform efforts are key areas on coordination both internally among the Bank, IFC, and MIGA which the Bank should focus, particularly in low-income and with its external development partners. and fragile settings. The Bank is a leader in the development and application of STRENGTHENING GOVERNANCE governance diagnostics, such as Doing Business reports, AND REDUCING CORRUPTION investment climate surveys, public expenditure tracking surveys, The World Bank Group’s strategy to scale up assistance to Public Expenditure and Financial Accountability indicators, the improve governance and fight corruption in client countries World Bank Institute (WBI) governance and anticorruption was unanimously endorsed by the Board in March 2007. An country diagnostics, and the WBI governance indicators. implementation plan was launched in December 2007, and a An example of WBI’s assistance to build capacity was an Governance and Anticorruption Council was created, chaired interactive global event, “Business and the Rules of the by the Managing Directors on a rotating basis, with senior- Game,” organized by WBI and InWent (Capacity Building level representation from across the Bank Group. The strategy International, Germany) for more than 300 private sector, calls for action on four key fronts: supporting good gover- government, civil society, and multilateral agency leaders. nance and anticorruption at the country level, preventing People from 49 countries discussed the role of business corruption in Bank-financed projects, addressing the private in fighting corruption, responding to climate change, and sector’s role in public sector governance and anticorruption advancing the MDGs. efforts, and supporting global efforts to reduce corruption. The Department of Institutional Integrity (INT) investigates The Bank is the leading donor globally in providing support for allegations of fraud and corruption in Bank-financed projects strengthening public sector management. In fiscal 2008, Bank as well as allegations of possible staff misconduct. INT support for governance and rule of law was $4.7 billion— reports its findings to the Bank’s senior management, which $4.4 billion for public sector governance and $304 million in turn decides on corrective measures to be taken. Since to support improvements in the rule of law. This support 1999, INT has handled nearly 3,000 cases of alleged fraud, accounted for 19 percent of total Bank lending. corruption, or other wrongdoing, resulting in the public IEG examined lending and other Bank support in 1999– debarment of 340 companies and individuals, whose names 2006 for public sector reform in four areas: public financial have been listed on the Bank’s Web site. THE STOLEN ASSET RECOVERY (StAR) INITIATIVE The World Bank Group, in partnership with the UN Office on Drugs and urges financial centers to lower barriers that retard asset recovery, Crime, launched StAR in September 2007. The initiative seeks to help develops partnerships to share information and experience, and offers developing countries track, freeze, and recover the proceeds of corruption expertise on making transparent the use of recovered assets for and prevent government funds from being stolen. StAR helps build the development purposes. It also works with UN member nations to ratify capacity to request the legal assistance necessary to recover assets, and implement the United Nations Convention Against Corruption. AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION 21 In fiscal 2008, an independent panel headed by former U.S. Conduct, and separate external certification of accuracy by a Federal Reserve Chairman Paul Volcker reviewed the work of renowned consulting firm. INT within the context of the World Bank Group’s governance and anticorruption strategy and affirmed that INT must play FINANCIAL AND PRIVATE SECTOR DEVELOPMENT a central part in that effort. The Bank announced in January The World Bank’s Voices of the Poor project asked 60,000 2008 that it would implement the Volcker panel’s recommen- people around the world how they hoped to escape poverty. dations. These include the creation of an independent advisory For men and women alike, the two most common responses board composed of international anticorruption experts to were employment in a business of their own and income protect the independence and strengthen the accountability earned from a job. Their answers underline why private sector of INT, as well as the formation of a preventive services and financial sector development are a critical part of the consulting unit to help Bank staff guard against fraud and Bank Group’s strategy: the private sector is the key generator corruption in Bank projects. In addition, a vice president–level of jobs and incomes that help the poor rise out of poverty. position was created to head INT. (See http://www.worldbank .org/integrity.) Improving the Business Climate In the spirit and interest of good organizational govern- The Doing Business project is a core piece of the Bank’s ance, members of the Bank Group’s Executive Management poverty reduction strategy; it focuses on the regulatory team authorized public disclosure of a summary of the annual burdens faced by small and medium enterprises. The annual statement of their 2007 financial interests and activities filed Doing Business reports compare indicators on business during 2008. The Executive Managers have committed to regulations and their enforcement in 178 countries. (See public disclosure to help demonstrate to stakeholders that http://www.doingbusiness.org.) in the discharge of their official duties and responsibilities, Country coverage of the Bank’s enterprise surveys contin- they are not, and do not appear to be, influenced by improper ues to expand. Results on 75,000 firms in 105 countries are consideration associated with their own private interests. The now available online. This information—which includes data summary disclosure statements are to be posted on the Bank on business perceptions and dozens of indicators on the Group’s public Web site after an internal review and certifica- quality of the business environment—helps underpin Bank tion by the Bank Group’s Office of Ethics and Business operational work. 22 THE WORLD BANK ANNUAL REPORT 2008 In July 2007, the Board endorsed the 2008–11 strategy main priority areas are simplifying regulations and for the multidonor Foreign Investment Advisory Service generating investment. (FIAS). The focus of FIAS has shifted from regional pro- FIAS supports regulatory simplification by providing grams to technical advice centered on core products, advisory support to client governments on reforms, as well from diagnostics to implementation, and from project as by offering in-depth assistance on regulatory governance, number and volume metrics to results metrics. Its two licensing, tax simplification, trade logistics, and secured lending. FIAS is leading an increasing number of success- ful Doing Business–related reform projects throughout the world involving IFC facilities, the Bank, and other donors. (See http://www.fias.net.) IEG recently undertook an evaluation of the construction, relevance, and use of the Doing Business indicators. IEG found Doing Business successful in motivating policy debate in countries but less successful as an aid in designing policies. The Group found no evidence that the indicators had distorted policy-making incentives in countries. It recommended that the indicators be interpreted within the country context, taking into consideration access to finance and infrastructure, the labor market, and corruption, as well as the level, type, and efficiency of regulations. To enhance the confidence and credibility of the indicators, IEG recommended recruiting more and more diverse informants, disclosing the number of informants, and increasing the transparency of the data. Building Robust and Diverse Financial Sectors The most important finance sector innovation of the fiscal year was the launch of the Global Emerging Markets Local Currency (Gemloc) bond program, approved by the Board in October 2007. Gemloc combines the comparative advantages of the Bank Group and the private sector to help develop local currency bond markets through three complementary efforts: a private sector investment manager that develops investment strategies for local currency bond markets; a new bond index (GEMX), based on market size and investabil- ity indicators; and Bank advisory services on reforms that can facilitate the creation of strong local bond markets. (See http://www.gemloc.org.) Demand for participation in the Financial Sector Assessment Program—a joint World Bank–International Monetary Fund (IMF) program that helps countries identify vulnerabilities in their financial systems and determine AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION 23 needed reforms—remained strong across countries at all EXPANDING MICROFINANCE PROGRAMS levels of development. Twenty-three countries and one regional The Consultative Group to Assist the Poor (CGAP), which supervisory body received initial assessments or updates during includes the Bank, advises and trains regulators and policy fiscal 2008, bringing the share of Bank and IMF members that makers around the world; governments such as Cambodia, have participated or volunteered to do so to 75 percent. the Democratic Republic of Congo, Kosovo, the Lao People’s The Bank took over management of the Financial Sector Democratic Republic, and Malawi; and global standard-setters Reform and Strengthening (FIRST) Initiative in fiscal 2008. such as the Basel Committee on issues related to access to This $100 million multidonor grant program seeks to build microfinance. robust and diverse financial sectors in low- and middle- CGAP has led the charge globally on technology for access income countries. FIRST approved 30 projects, valued at to finance and “branchless banking” (indeed, CGAP coined the $8.06 million, in fiscal 2008; 34 percent of this funding went term). CGAP experts are working with regulators in 10 countries to Africa. to facilitiate peer learning on the cutting edge of policy challenges created by the convergence of the communications and IMPROVING CORPORATE GOVERNANCE financial services industries. The CGAP Technology Program The Corporate Governance and Capital Markets Advisory has projects under way in Kenya, Mongolia, Pakistan, the Department led the development of a common approach Philippines, and South Africa, and uses new technologies shared by the world’s leading development finance institu- such as mobile phones and smart cards to provide 2 million tions for integrating corporate governance into due diligence low-income people with financial services that can help procedures. Thirty-one institutions signed the statement at improve their lives. CGAP is also developing a model to the fall 2007 meetings in Washington, DC. The department prepare the poorest people for microfinance and has launched also established a program for corporate governance code seven pilots in five countries—Ghana, Haiti, India, Pakistan, development in the Middle East and North Africa, which and Peru—over the past year. (See http://www.cgap.org.) has fostered wide acceptance of the value of sound corpo- rate governance practices for private sector growth in the MIGRATION AND REMITTANCES region. The Bank’s involvement in international migration increased substantially over the past four years, with an expanded Reducing the Cost of Remittances research program, an increase in international consultations on The Bank provided support for ongoing reforms in payment, migration issues, and support for improved handling of remit- remittance, and securities systems in more than 40 countries tances by client countries’ financial systems. In fiscal 2008 the in fiscal 2008. Its global payment system survey covers more Bank published Migration and Remittances Factbook 2008 (also than 140 countries and 300 technical issues in payment, available online); an edited volume, The International Migration remittance, and securities settlement. The survey results will of Women; and more than 25 working papers, including papers help Bank staff create indicators that can be used to support on diaspora bonds and securitization of remittances. advice to clients on payment system development. During Data sets covering high-skilled emigration and bilateral fiscal 2008, the Bank also launched a remittance price migration and remittances were expanded in fiscal 2008. The database to monitor industry response to the release of interna- Bank also completed or is conducting surveys of migration tional standards and provide a benchmark to consumers. The and remittance behavior at the household level in Brazil, goal is to help reduce the cost of remittances services, Ghana, India (Kerala), Samoa, Tajikistan, and Tonga; con- potentially saving recipients in developing countries as much ducted a study of the Indonesia-Malaysia remittance corridor; as $12 billion a year. and initiated studies on the development implications of 24 THE WORLD BANK ANNUAL REPORT 2008 human trafficking and a possible role for the Bank in pre- decisions. These data are compiled from a variety of sources, venting trafficking, and on the implications of climate change including the United Nations and its specialized agencies, the for migration flows in Central America. Country assistance Organisation for Economic Co-operation and Development, strategies in many countries have discussed the implications the IMF, regional development banks, private organizations, of large-scale migration. A fiscal 2008 country economic and national statistical offices. Adherence to internationally memorandum for Kenya, for example, included recommenda- accepted standards and norms results in a consistent, tions for mobilizing the resources of the diaspora. reliable source of information. During fiscal 2008 the Bank continued to support refugees in To improve the quality of international statistics, the postconflict environments in Africa, facilitate temporary migra- Development Data Group works with its partners to improve tion to more developed neighbors in the Pacific Islands, and statistical methods, promote data collection activities, study how regional transport corridors can be used to control compile global data sets, and help countries increase their HIV transmission in Sub-Saharan Africa. Globally, the Bank statistical capacity. Some of this work takes place through the continued its efforts to provide social protection to emigrants Partnership in Statistics for Development in the 21st Century through training, provision of information, and regulation of (PARIS21) and the International Comparison Program (ICP). recruitment as well as by strengthening health, education, and As one of the founding members, the Bank supports PARIS21 incentives to reduce the impact of the brain drain. and provides financial support to countries through a Trust Fund for Statistical Capacity Building (TFSCB). As of July 2008, 72 projects had been approved for financing from TFSCB II, IMPROVING THE QUALITY OF INTERNATIONAL STATISTICS and seven for financing from TFSCB III. Of these, 40 are Because reliable statistics are essential for formulating active. (See http://www.paris21.org.) policy and measuring development progress, the Bank’s The ICP is a worldwide statistical initiative that collects Development Data Group maintains several large interna- comparative price data and estimates purchasing power tional databases that provide key statistical information for parities of the world’s economies. The program, which operational activities and support critical management involves partners from national, regional, and international AN INCLUSIVE AND SUSTAINABLE GLOBALIZATION 25 agencies, analyzes data from 146 economies, making it the of themes includes early childhood development, education largest statistical initiative in the world. It is overseen by service delivery, conditional cash transfers, HIV/AIDS treatment the World Bank. and prevention, local development, malaria control, pay-for- The Bank makes development data available through performance in health services, rural roads, rural electrification, online databases and monitoring systems, such as those urban upgrading, and youth employment and service. (See used to measure progress toward the MDGs and IDA Results http://www.worldbank.org/dime.) Measurement System. (See http://www.worldbank.org/data.) IMPACT EVALUATION CIVIL SOCIETY The Development Impact Evaluation (DIME) Initiative is a Bank relations with civil society continued to intensify as Bank-wide collaborative effort involving thematic networks, reflected in the greater numbers of civil society organization regional units, and the research group under the guidance of (CSO) representatives accredited to attend the Annual and the World Bank’s Chief Economist. Its three primary purposes Spring Meetings during fiscal 2008. CSOs also increased their are to add to the number of World Bank–supported impact involvement in the Civil Society Policy Forum by sponsoring evaluations, particularly in strategic areas; to increase the dialogue sessions on such issues as extractive industries, ability of staff to design and carry out such evaluations in climate change, and debt relief. Important policy consulta- close collaboration with government agencies in developing tions were held with civil society on country systems for countries; and to build a process of systematic learning on procurement and the strategic framework for climate change. effective development interventions based on lessons from The Bank began the process of reviewing its approaches to completed evaluations. civil society engagement and policy consultation in order to Through the combined efforts of DIME, regional initiatives improve consistency and the quality of these interactions. (for example, the African Impact Evaluation Initiative), and Bank-CSO relations continued to expand at the country level sector-based strategies (such as the Human Development through CSO participation in project appraisals (73 percent), Network), 158 impact evaluations are being conducted. In country assistance strategy consultations (91 percent), and comparison, a total of 106 impact evaluations were completed Poverty Reduction Strategy participation (73 percent). (See by the World Bank between 1990 and 2007. DIME’s current list http://www.worldbank.org/civilsociety.) 26 THE WORLD BANK ANNUAL REPORT 2008 REGIONAL PERSPECTIVES 2 WORLD BANK REGIONS, COUNTRY OFFICES, AND BORROWER ELIGIBILITY The World Bank today operates out of more than 100 offices worldwide. Increased presence in client countries is helping the Bank to better understand, work more closely with, and provide faster service to clients. Three-fourths of outstanding loans are managed by country directors located away from the Bank's Washington, DC, headquarters. Thirty-six percent of staff are now based in country offices. Mexico Dominican Republic Jamaica Cape V Belize Haiti Guatemala Honduras Nicaragua The El Salvador Gu Costa Rica Panama R.B. de Venezuela Guyana Colombia Suriname Ecuador Kiribati Samoa LATIN AMERICA AND THE CARIBBEAN Peru FY08 New Commitments Brazil Bolivia IBRD | $4,353 million Fiji Tonga IDA | $307 million Portfolio of Projects | $18.8 billion Paraguay Argentina Dominican Chile Uruguay Republic Antigua and Barbuda St. Kitts and Nevis Dominica St. Vincent and St. Lucia the Grenadines Countries eligible for IBRD funds only Grenada Countries eligible for blend of IBRD and IDA funds Trinidad and Tobago R.B. de Venezuela Countries eligible for IDA funds only Inactive IDA-eligible countries Countries not receiving Bank funds Offices of the World Bank Offices with the Country Director present Bank region boundaries MIDDLE EAST AND NORTH AFRICA EUROPE AND CENTRAL ASIA FY08 New Commitments FY08 New Commitments IBRD | $1,203 million IBRD | $3,714 million IDA | $267 million IDA | $457 million Portfolio of Projects | $7.0 billion Portfolio of Projects | $18.1 billion Russian Federation Russian Fed. Belarus Poland Ukraine Moldova Mongolia Romania Kazakhstan Bulgaria Georgia Uzbekistan Azerbaijan Kyrgyz Rep. China Armenia Turkmenistan Turkey Tajikistan EAST ASIA AND PACIFIC Afghanistan Rep. of Algeria Tunisia Lebanon Syrian A.R. Iraq Islamic Rep. Korea FY08 New Commitments Morocco West Bank and Gaza Jordan of Iran Pakistan IBRD | $2,677 million Libya Arab Rep. Nepal Bhutan IDA | $1,791 million India of Egypt Bangladesh Portfolio of Projects | $20.9 billion Myanmar Vietnam Mauritania Cape Verde Rep. of Lao P.D.R. Sudan Eritrea Yemen Philippines Senegal Mali Burkina Niger Thailand The Gambia Faso Chad Cambodia Guinea-Bissau Nigeria Federated States of Micronesia Guinea Côte Djibouti Marshall Central Islands Sierra Leone d'Ivoire Ghana Benin African Ethiopia Sri Lanka Cameroon Rep. Liberia Palau Malaysia Togo Somalia Equatorial Guinea Maldives Uganda São Tomé and Principe Gabon Kenya Kiribati Rep. of Rwanda Congo Burundi Seychelles Dem. Rep. Tanzania Solomon of Congo Indonesia Papua Islands Comoros New Guinea Angola Timor-Leste Malawi Zambia Vanuatu Fiji Madagascar Zimbabwe Mauritius Poland Namibia Botswana Mozambique Ukraine South SOUTH ASIA Slovak Republic Africa Swaziland FY08 New Commitments Lesotho IBRD | $1,491 million Slovenia Romania Croatia Serbia IDA | $2,756 million Bosnia and Herzegovina Portfolio of Projects | $22.8 billion Bulgaria Montenegro Albania FYR Macedonia AFRICA FY08 New Commitments IBRD | $30 million IDA | $5,657 million Portfolio of Projects | $23.3 billion IBRD 32613R4 AUGUST 2008 AFRICA Angola Chad Gabon Benin Comoros The Gambia Botswana Congo, Democratic Ghana Burkina Faso Republic of Guinea Burundi Congo, Republic of Guinea-Bissau Cameroon Côte d’Ivoire Kenya Cape Verde Equatorial Guinea Lesotho Central African Eritrea Liberia Republic Ethiopia Madagascar For more than a decade, Africa—still the Bank’s top priority— Bank scaled up support for the sector in fiscal 2008 and agreed has posted healthy growth. Its GDP has expanded at an to increase lending for agriculture in Africa from $368 million in average rate of 5.4 percent a year. This rapid growth has been fiscal 2008 to $650 million in fiscal 2009 and to $800 million in fueled, on the one hand, by decisive and deft management fiscal 2010. The Bank also pursued regional solutions for of the macroeconomy of a majority of countries and, on the Africa’s most demanding development challenges: bridging the other hand, by more careful management of the global infrastructure gap in the provision of the energy indispensable commodities boom. As a result, Africa has become an for growing economies through initiatives such as the West attractive investment destination for foreign capital, notably Africa Power Pool, and supporting Africa’s efforts to expand in the oil, gas, and mining sectors. The upward trend has intra-African trade through the expansion of transport corridors awakened memories of the boom of the 1970s, leading to and customs reform and harmonization. It boosted Africa’s calls on African countries to make sure that their current efforts to access global markets and to use new trade platforms fortune is not wasted, as it was then. Riots in several African such as the Internet (under the East African Submarine Cable countries, triggered by rising fuel and food prices, have System, for example) and funded efforts to combat HIV/AIDS, served notice that growth must be inclusive—ensuring that malaria, tuberculosis, avian flu, and other pandemics. the poor participate in and benefit from its fruits—if the region is to accelerate progress toward meeting the Millennium WORLD BANK ASSISTANCE Development Goals. The Bank—the world’s largest provider of development assis- During fiscal 2008, the Bank expanded its support to African tance to Africa—provided $5.7 billion in loans, credits, and grants countries eager to improve management of their natural to Africa in fiscal 2008. The Bank approved 91 projects. It also resources sector. The Bank has helped build their capacity to completed 108 economic and sector work activities and secure just and fair deals when extraction concessions are 80 nonlending technical assistance activities, many of which awarded, deepening transparency in the management of focused on strengthening the commitment of countries to revenues, and ensuring that revenue from the commodities reforms. Two African countries—the Central African Republic and boom fuels sustainable development. Recognizing the potential Liberia—reached the decision point (when debt relief is revo- of agriculture to curb poverty, particularly in rural Africa, the cable) under the enhanced Heavily Indebted Poor Countries (HIPC) AFRICA FAST FACTS Total population: 0.8 billion Population growth: 2.4% TOTAL FISCAL 2008 TOTAL FISCAL 2008 Life expectancy at birth: 50 years New Commitments Disbursements Infant mortality per 1,000 births: 94 IBRD $30 million IBRD $42 million Female youth literacy: 64% IDA $5,657 million IDA $4,848 million 2007 GNI per capita: $952 Number of people living with HIV/AIDS: 22.5 million Portfolio of projects under implementation as of June 30, 2008: $23.3 billion Note: Life expectancy at birth and infant mortality rate per 1,000 live births are for 2006; female youth literacy is for 2005; HIV/AIDS data are from the UNAIDS/WHO 2007 AIDS Epidemic Update; other indicators are for 2007 from the World Development Indicators database. 30 THE WORLD BANK ANNUAL REPORT 2008 COUNTRIES ELIGIBLE FOR WORLD BANK BORROWING Malawi Rwanda Sudan Mali São Tomé and Swaziland Mauritania Principe Tanzania Mauritius Senegal Togo Mozambique Seychelles Uganda Namibia Sierra Leone Zambia Niger Somalia Zimbabwe Nigeria South Africa Initiative in fiscal 2008. At completion point, they would benefit The funds will be used to purchase and distribute more than from additional relief under the Multilateral Debt Relief Initiative. 21 million long-lasting insecticidal bed nets, provide more Liberia benefited from interim debt relief estimated at $2.8 bil- than 42 million doses of artemisinin-based combination lion in nominal terms for an external public and publicly guaran- therapy, support indoor residual spraying, and strengthen teed debt estimated at $4.7 billion in net present value terms. health systems. The nominal amount of HIPC debt relief provided to the Central African Republic is estimated at $823 million. The country’s SLOW BUT CERTAIN PROGRESS public and publicly guaranteed external debt was estimated at Over the past decade, Africa has shown that it can expand and $1.1 billion. No African country reached the completion point sustain economic growth. It now needs to reduce income (when debt relief is irrevocable) under HIPC in fiscal 2008, and disparities by sharing the fruits of growth more equitably none, therefore, benefited from the Multilateral Debt Relief through policies that pull in the poor—particularly rural Initiative in fiscal 2008. Under that initiative, $37 billion in debt, dwellers, women, and youth. the bulk of it owed by African countries, will be written off over Deficiencies in infrastructure—as measured by limited the next 40 years for countries with sound financial management roads, power shortages, and inefficient ports, among other and a commitment to poverty reduction. The Bank warned things—remain a major challenge, stifling the continent’s predatory lenders in developed countries that it is working to capacity to compete in world markets and raising the costs stop them from preying on the poor and reversing the benefits of doing business globally. Export costs in Africa account achieved through debt relief initiatives. for 18–35 percent of total costs; in China, by contrast, they In response to the food crisis, the Bank provided $10 million represent just 8 percent. in three special financing projects to help some of the most Recognizing the challenge of working in a continent prone vulnerable countries cope with rising prices in fiscal 2008. to conflict, the Bank Group adopted a new Rapid Response It engaged more than 40 countries in policy discussions Policy in fiscal 2008, under which the Bank can swiftly deliver on the crisis. COMBATING DISEASE To address pandemics, the Bank expanded funding to several landmark regional projects, including the Great Lakes Initiative on AIDS Support Project, the Inter-Governmental Authority on Development HIV/AIDS Partnership Program Support Project, the Regional HIV/AIDS Treatment Acceleration Project, and the Senegal River Basin Water Resource Development Project (malaria). It also established a new agenda for action in preventing and dealing with the consequences of HIV/AIDS through 2011 (see http://www .worldbank.org/afr/aids). Through its booster program for malaria control in Africa, the Bank committed about $470 million in IDA resources and trust funds to Sub-Saharan Africa from fiscal 2005 to fiscal 2008—more than nine times the volume of resources committed between 2000 and 2005. REGIONAL PERSPECTIVES 31 FIGURE 2.1 FIGURE 2.2 AFRICA AFRICA IBRD AND IDA LENDING BY THEME | FISCAL 2008 IBRD AND IDA LENDING BY SECTOR | FISCAL 2008 SHARE OF TOTAL OF $5.7 BILLION SHARE OF TOTAL OF $5.7 BILLION Water, Sanitation & Agriculture, Urban Development 11% 2% Economic Management Flood Protection 8% 6% Fishing & Forestry Environmental & Natural Trade & Integration 7% 6% Resource Management 7% Education Social Protection & Financial & Risk Management 3% Private Sector 17% Development Transportation 17% 17% Energy & Mining Social Development, Gender & Inclusion 5% Human 2% Finance 10% Development Rural Development 9% Law & Justice & Health & Public Administration 31% 8% Other Social Services Information & Rule of Law <1% 29% Public Sector Governance Communication <1% 3% Industry & Trade assistance to countries emerging from or severely affected by poor are not being fully realized. Moreover, households conflicts or disasters. Through a $250 million Forest Carbon themselves are willing to pay for these benefits, so grid Partnership Facility, the Bank encourages investment to stop extension into rural areas can be financially viable. The Bank deforestation and minimize the negative impact of climate is starting to investigate “smart subsidies” of the sort already change in return for access to carbon credits. In fiscal 2008, the used for off-grid electrification programs (such as solar home Bank launched the Lighting Africa Plan, which seeks to provide systems). However, IEG’s report shows that the costs of off- inexpensive, safe, and cleaner lighting to 250 million people. grid electrification are higher than those of grid extension, The Independent Evaluation Group’s new report, The and the benefits less. Directing funds to connection subsidies Welfare Impact of Rural Electrification, confirmed the benefits for grid extension can reach more poor people at lower cost. are significant enough to justify the investment. The evalua- The Bank will continue to support initiatives like these to tion also shows, however, that the larger share of benefits ensure that aid is effective, predictable, and supportive of from rural electrification continue to be captured by the results-oriented, country-led programs. It will continue to help nonpoor, although the gap is closing with the expansion of minimize transaction costs, in keeping with the March 2005 electrification. Two factors explain this pattern: which com- Paris Declaration. Toward that end, in fiscal 2008 the Bank munities get connected and which households can afford the approved a major simplification of and reduction in loan connection once the grid is available. By not enabling poorer charges for the 79 creditworthy low- and middle-income households to connect to the grid, and by not providing countries that are clients and shareholders of IBRD. The move information to consumers so they obtain their maximum has returned loan pricings to the levels in effect before the benefit, the potential benefits of providing electricity to the price increases of 1998. (See http://www.worldbank.org/afr.) 32 THE WORLD BANK ANNUAL REPORT 2008 TABLE 2.1 WORLD BANK LENDING TO BORROWERS IN AFRICA BY THEME AND SECTOR | FISCAL 2003–2008 MILLIONS OF DOLLARS THEME 2003 2004 2005 2006 2007 2008 Economic Management 37.8 68.0 46.5 31.4 94.6 139.4 Environmental and Natural Resource Management 227.0 195.2 217.2 250.6 212.0 338.0 Financial and Private Sector Development 383.6 810.9 768.2 979.1 962.7 982.1 Human Development 811.4 618.2 620.2 673.3 1,104.5 572.2 Public Sector Governance 432.4 818.4 708.0 964.7 859.2 1,612.1 Rule of Law 34.5 28.3 30.9 179.7 13.1 22.7 Rural Development 384.1 360.7 537.2 528.6 780.0 526.4 Social Development, Gender, and Inclusion 420.0 374.3 221.8 198.5 314.3 275.2 Social Protection and Risk Management 543.7 209.2 294.3 262.7 272.3 169.0 Trade and Integration 37.2 371.5 232.0 413.1 449.7 407.3 Urban Development 425.5 261.1 211.4 304.9 734.5 642.2 Theme Total 3,737.2 4,115.9 3,887.5 4,786.6 5,796.9 5,686.5 SECTOR Agriculture, Fishing, and Forestry 303.4 268.5 215.3 585.5 369.7 367.6 Education 423.6 362.9 369.0 339.3 706.6 373.0 Energy and Mining 324.4 365.8 509.5 524.5 773.0 939.4 Finance 67.2 165.7 68.6 142.3 26.3 129.7 Health and Other Social Services 775.9 723.1 590.3 614.0 687.3 467.5 Industry and Trade 92.7 95.4 253.8 348.4 144.2 196.2 Information and Communication 41.4 52.9 20.0 5.0 146.0 0.8 Law and Justice and Public Administration 721.8 1,004.2 1,077.5 1,263.0 1,352.5 1,748.0 Transportation 690.5 716.6 507.2 602.7 870.8 986.5 Water, Sanitation, and Flood Protection 296.3 360.8 276.2 361.9 720.5 477.9 Sector Total 3,737.2 4,115.9 3,887.5 4,786.6 5,796.9 5,686.5 Of which IBRD 15.0 0.0 0.0 40.0 37.5 30.0 Of which IDA 3,722.2 4,115.9 3,887.5 4,746.6 5,759.4 5,656.5 Note: Effective fiscal 2005, lending includes guarantees and guarantee facilities. REGIONAL PERSPECTIVES 33 EAST ASIA AND PACIFIC Cambodia Korea, Republic of China Lao People’s Fiji Democratic Republic Indonesia Malaysia Kiribati Marshall Islands Growth in the low- and middle-income economies of the East and climbing oil prices have dealt a blow to poor people in a Asia and Pacific region picked up from 9.8 percent in 2006 to number of the region’s client countries. The Bank is advising 10.2 percent in 2007, but was expected to decline by up to several client countries in the region on safety nets for protect- 2 percentage points in 2008 because of the global slowdown. ing the poorest people and on policy of directions for securing Nonetheless, sustained growth and propoor policies have rice supplies, expanding sources of renewable energy, and produced dramatic reductions in poverty in many of the mitigating the short-term impact of high oil prices. Bank’s client countries in the region. In 2007, the proportion of poor people (with consumption below $2 a day) fell to WORLD BANK ASSISTANCE 25 percent, compared with 69 percent in 1990. For the region’s The Bank in fiscal 2008 adopted a new strategy for the region fast-growing countries, growth has been accompanied by that reflects the evolving challenges of such a diverse range exceptionally rapid urbanization. By 2025, the region’s urban of economies. It focuses on scaling up the Bank Group’s population is likely to increase by 500 million people, or engagement to address the changing demands of middle- 68 percent, placing stress on urban infrastructure and income countries while also working to support countries increasing the need for social safety nets. dealing with fragility and conflict. While many countries in the region have reached, or will In fiscal 2008, the Bank delivered $4.5 billion in lending soon reach, the human development targets set under the for the region, including $2.7 billion in IBRD loans and Millennium Development Goals, stark differences between $1.8 billion in IDA credits and grants. countries remain. Indonesia, the Philippines, and Vietnam still have to catch up with some of the wealthier middle- SUPPORTING COUNTRIES TO MAKE income countries, while Cambodia, the Lao People’s THE MIDDLE-INCOME SHIFT Democratic Republic, Timor-Leste, and some fragile Pacific The Bank is supporting a number of East Asian countries that Island economies may fall short of some of the 2015 targets. are addressing the challenges that come with moving into Most East Asian countries are well positioned to navigate middle income, including developing sources of clean energy, the global slowdown because of investments made in struc- planning for better urban transport systems, providing social tural reforms in the past 10 years, but the food price crisis safety nets, and managing the human impacts of rural-urban EAST ASIA AND PACIFIC FAST FACTS Total population: 1.9 billion Population growth: 0.8% TOTAL FISCAL 2008 TOTAL FISCAL 2008 Life expectancy at birth: 71 years New Commitments Disbursements Infant mortality per 1,000 births: 24 IBRD $2,677 million IBRD $2,401 million Female youth literacy: 98% IDA $1,791 million IDA $1,111 million 2007 GNI per capita: $2,180 Number of people living with HIV/AIDS: 2.2 million Portfolio of projects under implementation as of June 30, 2008: $20.9 billion Note: Life expectancy at birth and infant mortality rate per 1,000 live births are for 2006; female youth literacy is for 2005; HIV/AIDS data are from the UNAIDS/WHO 2007 AIDS Epidemic Update; other indicators are for 2007 from the World Development Indicators database. 34 THE WORLD BANK ANNUAL REPORT 2008 COUNTRIES ELIGIBLE FOR WORLD BANK BORROWING Micronesia, Federated Papua New Guinea Timor-Leste States of Philippines Tonga Mongolia Samoa Vanuatu Myanmar Solomon Islands Vietnam Palau Thailand migration. A $200 million development policy loan to carbon dioxide–equivalent emissions every year for the next Indonesia is designed specifically to support policy reforms in 15 years by collecting and flaring methane gas from a solid the country’s infrastructure sector. It is helping the govern- waste landfill site on the main island of Java. ment to map infrastructure needs across sectors and regions and pursue reforms that will benefit people with the lowest IMPROVING GOVERNANCE ON THE GROUND access to infrastructure. In China, where energy demand is Groundbreaking work on governance and anticorruption almost outstripping supply, a $200 million loan will help continues in the East Asia and Pacific region. A new four-year catalyze large-scale domestic financing to increase the country assistance strategy for Papua New Guinea has put the efficiency of energy-intensive industries, while a $191 million loan in Liaoning Province will finance a project to demon- strate energy efficiency and environmental performance of heating and gas services in selected cities. In Vietnam, a $155 million IDA credit and a $9.8 million grant from the Global Environment Facility are helping the city of Hanoi to improve urban air quality and expand its mass transit public transport system. Meanwhile, a $50 million Bank loan is supporting government efforts in China to help millions of rural migrants to shift into urban employment through skills development programs and social protection schemes. A DUAL CHALLENGE FROM CLIMATE CHANGE In a region that both contributes to global greenhouse emissions and is highly vulnerable to the effects of climate change, the Bank is working on many fronts. A climate change and disaster risk management strategy is being developed for Papua New Guinea, and, with support from the Global Environment Facility and the Global Fund for Disaster Relief and Rehabilitation, the Bank is helping six Pacific Island countries to draw up plans for adapting to potential impacts from climate change. In China, five major carbon- trade agreements are bringing financial resources to support the introduction of cleaner technology in the steel sector, innovations in biogas reduction from agriculture, and broader use of lower-carbon liquefied natural gas. At the same time, the Bank is working with China to reduce greenhouse emissions by improving energy efficiency, restoring forests, and investing in renewable sources of energy. In Indonesia, a major agreement, brokered by the Bank, provides local government with credits for preventing around 250,000 tons of REGIONAL PERSPECTIVES 35 FIGURE 2.3 FIGURE 2.4 EAST ASIA AND PACIFIC EAST ASIA AND PACIFIC IBRD AND IDA LENDING BY THEME | FISCAL 2008 IBRD AND IDA LENDING BY SECTOR | FISCAL 2008 SHARE OF TOTAL OF $4.5 BILLION SHARE OF TOTAL OF $4.5 BILLION Environmental & Natural Water, Sanitation & Agriculture, Urban Development 15% 17% Resource Management Flood Protection 8% 3% Fishing & Forestry 5% Education Trade & Integration 4% Social Protection & 15% Energy & Mining Risk Management 2% Financial & Private Sector Social Development, 26% Development Transportation 34% 6% Finance Gender & Inclusion 4% 3% Health & Other Rural Development 12% 5% Social Services Rule of Law 1% 4% Industry & Trade Law & Justice & Information & Public Sector Governance 14% 5% Human Development Public Administration 20% <1% Communication transparent management of the country’s natural resources At the end of the fiscal year, an IDA grant was being and revenue stream at the top of its priority list. Through a prepared to support the government’s effort to bring $17 million loan, the Bank is supporting the country’s work to young people, especially in urban areas, into mainstream strengthen governance and accountability in mining sector employment. Another Bank study, “Opportunities to Improve institutions and to empower local people in mining communi- Social Services: Human Development in the Pacific Islands,” ties to monitor the delivery of programs and services. In also highlights the challenges to growth and development Mongolia, which is on the verge of a major minerals boom, posed by increasing numbers of youth and rising male the Bank is supporting the government to implement the unemployment. In Indonesia, an $86 million Bank loan is Extractive Industries Transparency Initiative and is finalizing supporting the government’s effort to upgrade the qualifica- preparation of an IDA project to help the government set up tions of over 1.4 million teachers and create world-class an appropriate financial and regulatory framework for educational institutions. Meanwhile, a new Bank-supported managing the mining and extractive industries sector in an rural health program in China will test new ideas and environmentally sustainable and transparent way. approaches for broadening rural people’s access to quality Communities across Indonesia are being empowered to health services. oversee and manage their own development plans through the government’s National Community Empowerment BUILDING PARTNERSHIPS AND EXCHANGING KNOWLEDGE Program. Two Bank-supported urban and rural poverty The Bank is working closely with the China Export-Import reduction interventions worth a total of $409 million (of which Bank to bring China’s development experience to other over $315 million is on IDA terms) will support the govern- developing countries through staff exchanges and joint pilot ment’s effort to reach all of Indonesia’s 70,000 villages with projects in Africa. A new Bank-managed trust fund worth the community-driven and -monitored service delivery $15 million, provided by the Republic of Korea, is helping East program. Meanwhile in Cambodia, a new Poverty Reduction Asian countries fight poverty and deliver government services and Growth Operation, supported by a $15 million IDA grant, more effectively. And a $37 million Infrastructure for Growth focuses on improving public financial management. trust fund provided by the Australian government is support- ing the Bank’s analytical studies, policy dialogue, and invest- ADDRESSING FRAGILITY AND ment projects in energy, transport, water and sanitation, IMPROVING HUMAN DEVELOPMENT telecommunications, infrastructure finance, and urban As Timor-Leste emerges from a recent series of security and development. In partnership with the Association of Southeast political setbacks, the Bank is working with its donor partners Asian Nations (ASEAN), the Bank is holding a series of on key areas of immediate priority: improving health services, dialogues with renowned Asian leaders on their views of and building skills and employment opportunities for the development. The “Catalysts of Change” series connects 12 country’s large youth population. A Bank study, “Timor-Leste’s sites via video across the Asia Pacific through the Global Youth in Crisis,” recommended six priority actions aimed at Development Learning Network and has featured high-profile empowering young people and expanding job opportunities. regional personalities. (See http://www.worldbank.org/eap.) 36 THE WORLD BANK ANNUAL REPORT 2008 TABLE 2.2 WORLD BANK LENDING TO BORROWERS IN EAST ASIA AND PACIFIC BY THEME AND SECTOR | FISCAL 2003–2008 MILLIONS OF DOLLARS THEME 2003 2004 2005 2006 2007 2008 Economic Management 29.7 0.0 87.0 78.7 82.5 0.0 Environmental and Natural Resource Management 232.3 432.2 446.9 396.4 565.0 746.0 Financial and Private Sector Development 458.8 553.9 340.6 720.7 999.1 1,132.9 Human Development 152.7 164.6 184.6 543.7 213.4 229.0 Public Sector Governance 341.5 299.0 344.5 385.9 705.4 644.4 Rule of Law 7.3 67.3 45.8 13.4 0.0 23.5 Rural Development 411.7 400.9 484.1 465.7 608.2 555.4 Social Development, Gender, and Inclusion 143.7 167.2 241.1 83.3 189.9 197.1 Social Protection and Risk Management 161.5 5.5 88.7 144.9 43.8 99.3 Trade and Integration 138.0 82.9 126.5 112.1 233.0 177.3 Urban Development 233.6 399.2 493.5 456.9 403.7 663.2 Theme Total 2,310.8 2,572.7 2,883.3 3,401.6 4,043.9 4,468.1 SECTOR Agriculture, Fishing, and Forestry 106.7 290.4 207.9 373.3 268.6 112.8 Education 225.7 118.6 228.0 287.9 125.3 234.3 Energy and Mining 254.3 67.2 359.1 425.2 118.5 666.1 Finance 22.7 49.0 213.1 197.6 230.1 263.0 Health and Other Social Services 184.1 84.3 204.3 160.6 132.7 213.0 Industry and Trade 32.5 78.7 159.1 29.3 102.0 189.5 Information and Communication 6.6 0.0 5.0 5.3 0.0 10.0 Law and Justice and Public Administration 385.1 257.5 436.6 693.6 887.7 888.8 Transportation 684.3 1,209.9 306.7 652.3 1,554.7 1,531.7 Water, Sanitation, and Flood Protection 408.7 417.1 763.7 576.5 624.3 359.0 Sector Total 2,310.8 2,572.7 2,883.3 3,401.6 4,043.9 4,468.1 Of which IBRD 1,767.1 1,665.5 1,809.8 2,344.3 2,806.6 2,676.7 Of which IDA 543.7 907.2 1,073.6 1,057.2 1,237.4 1,791.4 Note: Effective fiscal 2005, lending includes guarantees and guarantee facilities. REGIONAL PERSPECTIVES 37 SOUTH ASIA Afghanistan Bhutan Bangladesh India South Asia has experienced rapid economic growth, declining strengthening human development—and the cross-cutting poverty, and progress in human development for more than theme of improved governance. a decade. As a result, for the first time in its history, the The Bank’s program also reflects an emerging new reality: region with the world’s largest concentration of poor people South Asia can no longer be characterized as a uniformly has a real chance of ending mass poverty in a generation. low-income region. Growth is propelling several Indian states, Thanks to the economic reforms of the past two decades, along with Bhutan, Maldives, and parts of Sri Lanka, into annual GDP growth in the region has averaged 6 percent middle-income status. At the same time, per capita incomes since 2000. This growth has translated into a significant drop and human development indicators in Bangladesh, Nepal, in poverty rates across the subcontinent. In the next decade, most of Pakistan, and the lagging regions of India and South Asia is expected to contribute more to global poverty Sri Lanka are those of low-income countries. In addition, reduction than any other region. If it can accelerate growth some 71 million South Asians live in conflict, and violence is to 8–10 percent a year and sustain it, it can reduce income escalating in Afghanistan, northern Sri Lanka, and parts of poverty to the single digits. India and Pakistan. In recognition of the diverse needs of the Rapid growth alone will not necessarily end poverty, region, the Bank is differentiating its engagement. In educa- however. Economic growth has been accompanied by rising tion, for example, the Bank is working with partners inequality, and the region continues to suffer from some of to improve quality in aspiring middle-income countries the worst levels of human deprivation in the world. and states, while in low-income countries and states, its Corruption, confrontational politics, and conflict threaten to focus is on increasing both access to and the quality of derail the process of economic development. The region has primary schools. also been hard hit by the recent increase in world food prices, especially for rice and wheat, the two main staples in South WORLD BANK ASSISTANCE Asia. To address all of these issues, the World Bank’s strategy The Bank approved nearly $4.3 billion for South Asia in fiscal for South Asia comprises three pillars—accelerating and 2008, $1.5 billion in loans from IBRD and $2.8 billion in IDA sustaining growth, making development inclusive, and credits and grants. SOUTH ASIA FAST FACTS Total population: 1.5 billion Population growth: 1.4% TOTAL FISCAL 2008 TOTAL FISCAL 2008 Life expectancy at birth: 64 years New Commitments Disbursements Infant mortality per 1,000 births: 62 IBRD $1,491 million IBRD $1,175 million Female youth literacy: 65% IDA $2,756 million IDA $2,379 million 2007 GNI per capita: $880 Number of people living with HIV/AIDS: 2.7 million Portfolio of projects under implementation as of June 30, 2008: $22.8 billion Note: Life expectancy at birth and infant mortality rate per 1,000 live births are for 2006; female youth literacy is for 2005; HIV/AIDS data are from the UNAIDS/WHO 2007 AIDS Epidemic Update; other indicators are for 2007 from the World Development Indicators database. 38 THE WORLD BANK ANNUAL REPORT 2008 COUNTRIES ELIGIBLE FOR WORLD BANK BORROWING Maldives Pakistan Nepal Sri Lanka An important component of the Bank’s strategy is its ENSURING SERVICE DELIVERY AMID ARMED CONFLICT analytic and advisory work. A recent report on gender in Continuing its support for developing Afghanistan’s rural Bangladesh documented significant improvements in gender economy and improving rural livelihoods, the Bank provided equality and women’s status while pointing to the need to $250 million in grants to improve access to basic services, increase female participation in the labor force and give increase equitable access to quality basic education, expand women greater voice in society. A study on education in microfinance services, and help curb the spread of HIV/AIDS. Punjab, Pakistan, concluded that the dramatic increase in It also supported a program of contracting out health services private schools requires policy makers to reexamine educa- to nongovernmental organizations, increasing the number of tion policies. The Bank also published a report proposing people with access to health care by some 6 million. economic incentives and development initiatives to reduce opium production in Afghanistan, conducted a study on labor STRENGTHENING INFRASTRUCTURE issues in India, and performed an environmental assessment The Bank is working to address South Asia’s vast urban and in Pakistan. rural infrastructure deficits, often cited as the greatest con- straint to foreign investment. Half of the region’s population SUPPORTING LAGGING REGIONS AND SECTORS still lacks access to electricity. To help address the problem, In recent years, the Bank has sharpened its focus to ensure the Bank provided a $400 million loan for the Rampur that lagging regions such as Bihar in India and Baluchistan Hydropower Project in the state of Himachal Pradesh that will Province in Pakistan, sectors such as agriculture, and groups provide renewable, low-carbon energy to India’s overstretched such as women and disadvantaged minorities participate in northern electricity grid. It also extended a $600 million loan to growth. Inclusion is critical if the lives of the region’s 400 mil- the Power Grid Corporation of India, backed by a guarantee lion poor people are to improve. In fiscal 2008, the Bank from the government of India, designed to increase reliable approved a $225 million loan/credit to the state of Bihar to power exchange between regions and states. support implementation of critical structural reforms for attaining sustainable and inclusive development while MAKING DEVELOPMENT INCLUSIVE improving the delivery of key public services. The Bank has innovated and scaled up rural livelihood and About 1 billion people live in rural areas in South Asia. As empowerment programs that provide microfinance, access to a result, the region’s economy depends on agriculture—and markets, and self-employment opportunities to millions of hence irrigation—more than any other region in the world. poor people, especially women and marginalized groups. In The Bank provides assistance to South Asian governments fiscal 2008, it extended its largest support package to Nepal, in many aspects of the management of water resources, providing $253 million in IDA grants, $100 million of which including watersheds, groundwater, international waters such were allocated to the second phase of the Poverty Alleviation as the Indus Waters Treaty, and river basins. In fiscal 2008, Fund, which has reached more than 900,000 rural Nepalese the Bank approved a $150 million credit to enhance water in 25 districts. Thanks to this program, more than 15,600 distribution in Pakistan’s Sindh Province. In neighboring households now have access to paved roads for the first time, Baluchistan, it approved a $25 million credit to boost agricul- and more than 32,000 new households now have access to tural production and improve the use of water in irrigation. In water supply, bridges, and sanitation. Bangladesh, it supported a $62.6 million project to improve Some 10,000 community infrastructure projects have been agricultural productivity and farm income by revitalizing the completed under the Pakistan Poverty Alleviation Fund, national agricultural technology system. touching the lives of more than 2.5 million people in about REGIONAL PERSPECTIVES 39 FIGURE 2.5 FIGURE 2.6 SOUTH ASIA SOUTH ASIA IBRD AND IDA LENDING BY THEME | FISCAL 2008 IBRD AND IDA LENDING BY SECTOR | FISCAL 2008 SHARE OF TOTAL OF $4.2 BILLION SHARE OF TOTAL OF $4.2 BILLION Water, Sanitation & Agriculture, Urban Development 1% 3% Economic Management Flood Protection 5% 10% Fishing & Forestry Environmental & Natural Trade & Integration 2% 9% Resource Management Transportation 5% Social Protection & Risk Management 3% Social Development, Law & Justice & Public Gender & Inclusion 8% Administration 16% 16% Education Financial & Private Sector Information & Rural Development 14% 31% Development Communication <1% Rule of Law 1% Industry & Trade 4% Health & Other Social Services 6% Public Sector Governance 10% 18% Human Development Finance 2% 35% Energy & Mining 5,000 villages. More than half of these projects provide safe Bangladesh is one of the most vulnerable countries in drinking water or access to safe sanitation. In fiscal 2008, the the world to extreme weather events. The Bank is working fund received additional financing of $75 million from the Bank with various partners to help develop a major disaster to mobilize 5 million people in 25 of the country’s poorest preparedness program for the country. In fiscal 2008, the districts into community organizations and local support Bank helped Bangladesh recover from the dual shocks of organizations. the August flooding and the November cyclone by approving In Andhra Pradesh, India, Bank-funded projects have $245 million for flood and cyclone response, $175 million helped some 8 million women build incomes, improve living of which was quick disbursing. Total World Bank assistance standards, and gain political influence by banding together in to Bangladesh for flood and cyclone relief is expected to some 630,000 self-help groups. The Bank continued its exceed $400 million. support of this program in fiscal 2008 by providing $65 million to finance critical investments in institution and capacity IMPROVING GOVERNANCE building that will allow community institutions of poor women Governance lies at the heart of the Bank’s work in South Asia. to become sustainable and self-reliant. Over the past five years, it has been working with client countries at the economy, sector, and project levels to RESPONDING TO CLIMATE CHANGE strengthen governance, increase public accountability for Few regions in the world are at greater risk from climate results, and mitigate corruption. The Governance Country change than South Asia. The 2007 floods in Bangladesh, India, Assistance Strategy for Bangladesh and governance reforms and Nepal, which claimed several thousand lives, were a in irrigation, the financial sector, and education in Pakistan reminder that climate change is already beginning to have an are two examples. impact. The Bank’s response has been to significantly scale The January 2008 India Detailed Implementation Review, up its activity on adapting to and mitigating climate change. It which revealed serious indicators of fraud and corruption is providing assistance and advocacy for national programs in in five Bank-financed health projects in India, has implica- urban development, rural areas, coastal zone, and ecosystem tions for how the Bank promotes better governance—in management. It is also embarking on a long-term program country systems and within Bank-financed operations. The to strengthen water cooperation among Bangladesh, India, Bank’s response to the review seeks to straddle the twin and Nepal for flood control and hydropower generation. challenges of strengthening country systems while Cooperation among Bangladesh, India, and Nepal on flood enhancing the Bank’s own supervision framework. (See mitigation could benefit 400 million people. http://www.worldbank.org/sar.) 40 THE WORLD BANK ANNUAL REPORT 2008 TABLE 2.3 WORLD BANK LENDING TO BORROWERS IN SOUTH ASIA BY THEME AND SECTOR | FISCAL 2003–2008 MILLIONS OF DOLLARS THEME 2003 2004 2005 2006 2007 2008 Economic Management 123.5 7.7 87.5 56.6 11.2 122.8 Environmental and Natural Resource Management 94.2 94.8 433.9 93.0 309.7 386.6 Financial and Private Sector Development 689.1 689.9 923.0 550.4 809.9 1,344.5 Human Development 546.9 760.6 1,041.6 391.7 1,476.3 788.3 Public Sector Governance 467.3 669.8 639.5 597.9 916.6 423.7 Rule of Law 12.5 2.9 10.5 7.2 50.4 26.0 Rural Development 403.7 314.1 1,132.5 568.6 1,095.5 574.1 Social Development, Gender, and Inclusion 197.3 642.8 265.3 366.9 372.5 321.5 Social Protection and Risk Management 184.4 98.6 337.0 472.3 550.5 145.4 Trade and Integration 197.3 52.7 63.7 138.8 31.3 68.8 Urban Development 2.6 87.8 59.0 553.7 7.7 45.2 Theme Total 2,918.7 3,421.6 4,993.3 3,797.2 5,631.6 4,246.8 SECTOR Agriculture, Fishing, and Forestry 212.6 251.9 940.8 368.9 733.6 420.5 Education 364.6 665.8 286.4 377.2 724.7 694.5 Energy and Mining 150.6 130.8 83.6 483.0 243.7 1,481.4 Finance 185.8 331.4 461.8 73.0 678.1 86.6 Health and Other Social Services 369.0 334.6 493.2 195.9 1,006.2 247.5 Industry and Trade 144.9 46.1 485.2 306.5 292.9 167.5 Information and Communication 11.5 16.9 91.9 50.0 2.8 13.2 Law and Justice and Public Administration 372.3 925.5 885.7 1,101.4 1,165.8 699.6 Transportation 1,067.6 444.8 1,181.0 520.1 559.9 229.9 Water, Sanitation, and Flood Protection 40.0 273.7 83.7 321.3 223.9 206.1 Sector Total 2,918.7 3,421.6 4,993.3 3,797.2 5,631.6 4,246.8 Of which IBRD 836.0 439.5 2,095.9 1,231.0 1,599.5 1,490.6 Of which IDA 2,082.7 2,982.1 2,897.4 2,566.2 4,032.1 2,756.2 Note: Effective fiscal 2005, lending includes guarantees and guarantee facilities. REGIONAL PERSPECTIVES 41 EUROPE AND CENTRAL ASIA Albania Croatia Armenia Georgia Azerbaijan Kazakhstan Belarus Kyrgyz Republic Bosnia and Herzegovina Macedonia, former Yugoslav Bulgaria Republic of The Europe and Central Asia region enjoyed robust economic of Independent States (CIS); energy prices rose about growth of 6.7 percent in 2007, continuing the strong growth and 8 percent in Central and Eastern Europe, 18 percent in poverty reduction it has experienced since the mid-1990s. middle-income CIS countries, and more than 30 percent in Nearly 50 million of the region’s 480 million people moved out low-income CIS countries. Overall, inflation concerns are of poverty between 1999 and 2006. Large gains in productivity— back on the front burner for policy makers in the region, as the result of continued enterprise restructuring, technology the CIS countries are now facing an average of 13.4 percent diffusion, and double-digit growth in investment (supported and the Central and Eastern European countries 6.1 percent by rapid credit expansion through lending by domestic and in inflationary pressures. foreign banks)—as well as increased hydrocarbon production have driven rapid growth in some of the region’s countries. WORLD BANK ASSISTANCE Along with strong growth in remittance inflows in many coun- The Bank approved a total of 47 IBRD/IDA projects for tries, these factors have also boosted private consumption. $4.2 billion in the region, including two food-crisis responses Despite these gains, by the end of 2006, some 180 million (one regular project and one additional financing) in the Kyrgyz people—more than a third of the region’s population—contin- Republic. In addition, the Bank approved one special financing ued to subsist on less than $2.15 a day (the definition of poverty operation and one special financing—additional financing in in this region because of the additional expenditures for heating Tajikistan to respond to the food crisis. The Bank also com- and warm clothing necessitated by the cold climate), and pleted 80 economic and sector work activities and delivered millions more were living on less than $4.30 a day (the portion 88 nonlending technical assistance activities focusing on of the population that is “economically vulnerable” and could building country capacity. The Bank’s newest flagship report become poor in the event of an economic downturn). on the region, Unleashing Prosperity: Productivity Growth in Rising food and energy prices have complicated the Eastern Europe and the Former Soviet Union, emphasizes conduct of macroeconomic management across the region. the importance of continued policy reform—particularly in In 2007, food prices rose about 12 percent in Central and infrastructure, finance, and institutional quality—for Eastern Europe and nearly 20 percent in the Commonwealth increasing economic productivity, which drives growth. EUROPE AND CENTRAL ASIA FAST FACTS Total population: 0.4 billion Population growth: 0% TOTAL FISCAL 2008 TOTAL FISCAL 2008 Life expectancy at birth: 69 years New Commitments Disbursements Infant mortality per 1,000 births: 23 IBRD $3,714 million IBRD $2,696 million Female youth literacy: 98% IDA $457 million IDA $527 million 2007 GNI per capita: $6,051 Number of people living with HIV/AIDS: 1.6 million Portfolio of projects under implementation as of June 30, 2008: $18.1 billion Note: Life expectancy at birth and infant mortality rate per 1,000 live births are for 2006; female youth literacy is for 2005; HIV/AIDS data are from the UNAIDS/WHO 2007 AIDS Epidemic Update; other indicators are for 2007 from the World Development Indicators database. 42 THE WORLD BANK ANNUAL REPORT 2008 COUNTRIES ELIGIBLE FOR WORLD BANK BORROWING Moldova Slovak Republic Montenegro Tajikistan Poland Turkey Romania Turkmenistan Russian Federation Ukraine Serbia Uzbekistan Regional initiatives are particularly important to coun- of the ease of doing business. Four countries (Croatia, FYR tries that have their sights set on joining the European Macedonia, Georgia, and Bulgaria) were among the top Union (EU). The Bank is supporting the Energy Community 10 reformers worldwide in 2007. of Southeastern Europe, which is establishing a market In November 2007, the World Bank opened the Centre for to share energy efficiently. Albania, Croatia, the former Financial Reporting Reform in Vienna. Its goal is to help Yugoslav Republic of Macedonia, and Serbia are part of countries, primarily in Southeast Europe and the new EU this effort. member states, to enhance the quality of financial reporting standards in order to improve their investment climates. USING A DIFFERENTIATED BUSINESS MODEL The Bank supports poor countries and fragile states in a STRENGTHENING THE LEGAL, number of ways, including by decentralizing more staff to INSTITUTIONAL, AND STRUCTURAL FRAMEWORK locations where capacity constraints are severe and by helping The Bank approved a $400 million Public Sector Development with donor coordination, harmonization, and alignment. On Policy Loan to Turkey to support a sustained medium-term the other hand, Europe and Central Asia’s middle-income process of legal, institutional, and structural development countries, given their diversity, also receive tailored support. via improved quality of fiscal adjustment as well as social For example, in lower-middle-income countries, investment protection through pension reform, implementation of climate issues are important and require Bank assistance, administrative reforms intended to strengthen administrative while in resource-rich countries, the Bank provides support capacity, and support of efficiency-increasing and cost-saving for diversifying the economic base of clients. In EU-candidate measures in the health system to sustain implementation of countries, the Bank supports the EU accession agenda, the Public Financial Management and Control Law. The law whereas in new EU member states, the Bank supports has underpinned the outstanding improvements in Turkey’s countries in their aim to achieve convergence with EU public expenditure management system. average income levels. IMPROVING GOVERNANCE AND FIGHTING CORRUPTION IMPROVING INFRASTRUCTURE The Bank continues to work with the European Bank for The Bank extended several loans for infrastructure in the Reconstruction and Development in conducting the Business region. Among these were $200 million to improve housing in Environment and Enterprise Performance Survey (BEEPS). the Russian Federation, $450 million for railroad rehabilitation BEEPS data have been used in studies of corruption, judicial in Azerbaijan, $200 million to improve power transmission in systems, and other areas. These data provided the backbone Ukraine, $105 million to improve regional and local roads in for the Anticorruption in Transition series of studies as well as FYR Macedonia, and $140 million to improve urban infrastruc- for Judicial Systems in Transition Economies. Both studies ture in Ukraine. monitor changes over time to gain insights into what is working and what challenges, notably corruption, remain in CREATING AN ATTRACTIVE BUSINESS ENVIRONMENT areas that affect the business environment. Structural reforms in most countries have driven the region’s ongoing success in creating an attractive business climate. ADDRESSING GLOBAL AND REGIONAL ISSUES Europe and Central Asia is reforming more rapidly than any The Bank is also addressing a few broad strategic themes, other region in the world, surpassing even East Asia in terms such as climate change and energy, at the regional level by REGIONAL PERSPECTIVES 43 FIGURE 2.7 FIGURE 2.8 EUROPE AND CENTRAL ASIA EUROPE AND CENTRAL ASIA IBRD AND IDA LENDING BY THEME | FISCAL 2008 IBRD AND IDA LENDING BY SECTOR | FISCAL 2008 SHARE OF TOTAL OF $4.2 BILLION SHARE OF TOTAL OF $4.2 BILLION Water, Sanitation & Agriculture, Urban Development 14% <1% Economic Management Flood Protection 14% 3% Fishing & Forestry Environmental & Natural 2% Education 11% Resource Management 13% Energy & Mining Trade & Integration 12% Social Protection & 7% Finance Risk Management 3% Financial & Private Sector Health & Other Social Development, 31% Development 5% Social Services Gender & Inclusion 1% Transportation 21% Rural Development 6% 12% Industry & Trade Rule of Law 4% Law & Justice & Information & Public Sector Governance 12% 5% Human Development Public Administration 22% 1% Communication building up its stock of knowledge and expertise and then populations, which will lead to a declining working-age operationalizing on a case-by-case basis. Through lending population and the challenge of how to pay for the necessary and advisory services, the Bank is also increasingly support- social safety nets while dealing with development progress. ing activities on energy efficiency, cleaner production, and The region produced a flagship study, Red to Gray: The “Third waste management. Transition” of Aging Populations in Eastern Europe and the Former Soviet Union, that sets the analytical basis for policy DEVELOPING LIFETIME SKILLS reforms that should help client countries deal with issues After the political and economic transitions of the past, from pension policies to technology absorption and innova- countries in the region now face a third transition: aging tion. (See http://www.worldbank.org/eca.) BOX 2.1 IMPROVING THE LIVES OF PEOPLE IN EUROPE AND CENTRAL ASIA The Bank held its first annual “Improving the Lives of safety in Armenia, increasing access to health services People in ECA: A Week of Celebration and Learning” in in the Kyrgyz Republic, providing higher-quality education March 2008. Awards of recognition were granted to 22 for rural students in Romania, and restoring the Bank activities, including projects for improving dam Northern Aral Sea. 44 THE WORLD BANK ANNUAL REPORT 2008 TABLE 2.4 WORLD BANK LENDING TO BORROWERS IN EUROPE AND CENTRAL ASIA BY THEME AND SECTOR | FISCAL 2003–2008 MILLIONS OF DOLLARS THEME 2003 2004 2005 2006 2007 2008 Economic Management 19.5 242.0 17.4 4.6 5.7 2.6 Environmental and Natural Resource Management 122.7 309.4 394.4 148.8 397.6 461.4 Financial and Private Sector Development 483.3 950.2 933.9 1,461.1 823.6 1,295.9 Human Development 550.4 297.1 539.4 360.3 258.3 228.8 Public Sector Governance 317.7 895.1 272.3 589.1 328.8 515.0 Rule of Law 289.8 132.3 66.8 401.6 230.4 170.6 Rural Development 194.9 117.4 161.5 238.5 150.1 260.2 Social Development, Gender, and Inclusion 55.9 33.9 246.6 95.1 23.2 24.4 Social Protection and Risk Management 288.5 305.3 668.8 335.9 346.7 125.6 Trade and Integration 130.6 182.6 424.4 226.6 539.5 497.9 Urban Development 216.7 93.6 368.0 183.0 658.2 588.8 Theme Total 2,670.0 3,559.1 4,093.5 4,044.6 3,762.2 4,171.1 SECTOR Agriculture, Fishing, and Forestry 335.4 168.6 107.0 117.9 53.4 126.3 Education 395.0 164.0 263.8 126.7 81.9 67.4 Energy and Mining 262.9 352.2 657.9 1,108.3 337.6 546.7 Finance 195.8 836.9 259.1 374.5 353.5 311.5 Health and Other Social Services 415.3 244.3 484.9 339.9 192.9 215.9 Industry and Trade 269.0 126.3 253.5 274.8 395.5 499.0 Information and Communication 1.0 7.0 10.9 0.0 0.0 23.6 Law and Justice and Public Administration 698.9 1,176.8 1,160.6 1,271.7 812.6 919.0 Transportation 30.6 321.2 557.9 416.7 712.3 893.7 Water, Sanitation, and Flood Protection 66.3 162.0 337.9 14.2 822.4 568.0 Sector Total 2,670.0 3,559.1 4,093.5 4,044.6 3,762.2 4,171.1 Of which IBRD 2,089.2 3,012.9 3,588.6 3,531.9 3,340.1 3,714.3 Of which IDA 580.8 546.2 504.9 512.8 422.1 456.8 Note: Effective fiscal 2005, lending includes guarantees and guarantee facilities. REGIONAL PERSPECTIVES 45 LATIN AMERICA AND THE CARIBBEAN Antigua and Barbuda Costa Rica Argentina Dominica Belize Dominican Republic Bolivia Ecuador Brazil El Salvador Chile Grenada Colombia Guatemala In 2007, the Latin America and the Caribbean region marked and fuel are especially sensitive and their rising costs are a fourth straight year of growth in excess of 5 percent—its causing sociopolitical stress. Declining remittances from abroad healthiest spurt since the 1970s. Governments in the region could also reduce growth and negatively affect antipoverty have put in place solid macroeconomic policies and have strategies, especially in Mexico and Central America. taken advantage of favorable external developments to reduce vulnerabilities. Financial markets are recognizing the region’s WORLD BANK ASSISTANCE stronger economic and fiscal position. Brazil and Peru joined The Bank’s strategic partnership with Latin America and the Chile and Mexico this year in achieving investment grade. Caribbean focuses on achieving broad-based, sustainable Poverty rates have fallen, albeit modestly. These declines growth to reduce poverty and inequality. Although this goal are linked to the steady economic growth of the past few applies to all countries in the region, the diversity of the years coupled with more propoor public expenditures, countries means that priorities and solutions are tailored including targeted cash transfer programs. The challenge for carefully to individual circumstances. For middle-income the region today is to sustain growth and continue to provide countries, the Bank offers an integrated package of services, economic and social opportunities for all while facing a less including analytic advice, technical assistance, policy dia- favorable global environment. Of most concern in the immedi- logue, new customized financial products, and a platform for ate term is management of the impacts of the twin challenges global issues management such as trade and climate change. of the economic slowdown in the United States and rising fuel For low-income countries, it provides concessional financing, and food prices. donor coordination, and specialized support for fragile states. The rising global price of food, fuel, and other commodities In fiscal year 2008, World Bank financing for Latin America is having differing effects across and within countries. In and the Caribbean reached $4.7 billion, with $4.4 billion broad terms, the boom in commodity and agricultural prices in loans from IBRD and $0.3 billion in credits from IDA. benefits South America but hurts countries in Central Brazil, Colombia, and Mexico were the largest borrowers. America and the Caribbean (with the exception of Trinidad and Transportation, public administration and law, and education Tobago). Within countries—especially net importers—food were the largest sectors. The region was responsible for LATIN AMERICA AND THE CARIBBEAN FAST FACTS Total population: 0.6 billion Population growth: 1.2% TOTAL FISCAL 2008 TOTAL FISCAL 2008 Life expectancy at birth: 73 years New Commitments Disbursements Infant mortality per 1,000 births: 22 IBRD $4,353 million IBRD $3,210 million Female youth literacy: 96% IDA $307 million IDA $159 million 2007 GNI per capita: $5,540 Number of people living with HIV/AIDS: 1.8 million Portfolio of projects under implementation as of June 30, 2008: $18.8 billion Note: Life expectancy at birth and infant mortality rate per 1,000 live births are for 2006; female youth literacy is for 2005; HIV/AIDS data are from the UNAIDS/WHO 2007 AIDS Epidemic Update; other indicators are for 2007 from the World Development Indicators database. 46 THE WORLD BANK ANNUAL REPORT 2008 COUNTRIES ELIGIBLE FOR WORLD BANK BORROWING Guyana Paraguay Suriname Haiti Peru Trinidad and Tobago Honduras St. Kitts and Nevis Uruguay Jamaica St. Lucia Venezuela, República Mexico St. Vincent and the Bolivariana de Nicaragua Grenadines Panama 19 percent of total Bank IBRD/IDA lending and for 32.3 per- efforts under its National Climate Change Strategy to main- cent of total IBRD lending. stream climate change considerations in public policy. The loan is designed to decrease the adverse environmental WORKING WITH THE POOREST COUNTRIES impacts of greenhouse gas emissions and concentrations on In December 2007, donor countries—including for the first a voluntary basis in key sectors. time Brazil and Mexico—pledged a record $25.2 billion to the World Bank to help overcome poverty in the world’s poorest PROVIDING TIMELY ANALYSIS, countries. Part of these resources will support the Bank’s SHARING KNOWLEDGE ongoing efforts in five IDA countries in the region: Bolivia, Latin America is the region that receives the largest volume of Guyana, Haiti, Honduras, and Nicaragua. remittances, estimated at about $60 billion in 2007. To better Special resources are being devoted to Haiti, which has understand the impact of remittances, the region produced a recently emerged from civil conflict. In May, the Board report, Remittances and Development: Lessons from Latin approved a $10 million grant from the newly introduced America, which shows that the money migrant workers send Fast-Track Food Facility to help Haiti respond to the food price back to their home countries is linked to lower poverty levels crisis and to support implementation of the country’s poverty and improvements in education and health indicators. reduction strategy. Remittances also contribute to higher growth and investment Nicaragua will receive funding and debt relief under a new, and are associated with lower economic volatility. Because five-year strategy. The strategy calls for $240 million in IDA remittance income is equivalent to 10–20 percent of GDP in assistance aimed at spurring economic development; enhanc- many small countries in the Caribbean and Central America ing productivity and increasing competitiveness; building and to 3–10 percent in some larger ones (Colombia, Ecuador, human capital; and developing state institutions that will Mexico), the economic slowdown in the United States could strengthen governance, accountability, and citizen participation adversely affect poverty, particularly among recipient in government. The World Bank’s Debt Reduction Facility also households. is supporting a $1.4 billion cash buyback of Nicaragua’s external commercial debt. BOOSTING GROWTH AND JOB CREATION The Bank continued to support innovative programs in the SUPPORTING THE MIDDLE-INCOME COUNTRIES’ AGENDA region to stimulate the investment and competitiveness that In March 2008, Colombia became the first country to benefit sustain high rates of economic growth and job creation. The from a new Bank policy that significantly extends loan overriding priority over the medium- and long-term for the maturities; Board approval of a $300 million loan with region is to maintain growth by creating quality jobs for a larger longer maturities will help the country match the terms of proportion of the population and by increasing productivity. student loans with its borrowings from the Bank and thus will Examples of work in this area include policy advice on support Colombia’s efforts to finance higher education for reducing costs of freight transport and logistics services for low-income students. Argentina, Brazil, Colombia, and El Salvador; a regional Supporting the efforts of middle-income countries to hydro-energy investment feasibility study for Central address global issues in individual country contexts has also America; agricultural technology and research projects in been an important priority. In fiscal 2008, the Bank approved a Nicaragua and Peru; youth employment programs in the Development Policy Loan for $501 million to support Mexico’s Caribbean and Honduras; labor markets analytical and REGIONAL PERSPECTIVES 47 FIGURE 2.9 FIGURE 2.10 LATIN AMERICA AND THE CARIBBEAN LATIN AMERICA AND THE CARIBBEAN IBRD AND IDA LENDING BY THEME | FISCAL 2008 IBRD AND IDA LENDING BY SECTOR | FISCAL 2008 SHARE OF TOTAL OF $4.7 BILLION SHARE OF TOTAL OF $4.7 BILLION Water, Sanitation & Agriculture, Urban Development 18% 3% Economic Management Flood Protection 10% 7% Fishing & Forestry Environmental & Natural 14% Resource Management 11% Education Trade & Integration 5% Financial & Private Sector 6% Energy & Mining Social Protection & 13% Development Transportation 24% Risk Management 7% Social Development, 5% Finance Gender & Inclusion 2% Health & Other Rural Development 7% 10% Human Development 9% Social Services Law & Justice & Rule of Law 1% 20% Public Sector Governance Public Administration 18% 10% Industry & Trade advisory assistance in the Andean countries; and the Brazil is supporting an ongoing effort to implement, administer, and Knowledge and Innovation for Competitiveness study. publicize the country’s Freedom of Information Act, one of the first laws of its kind in Latin America. BRIDGING THE SOCIAL GAP Creating equal opportunities for all citizens is crucial to LEVELING THE PLAYING FIELD ON GLOBAL ISSUES reducing the social divide in Latin America and the Caribbean. Countries in the region are emerging as key players on issues The World Bank is working with countries across the region to of global concern, and the Bank’s role has been to support develop universal and affordable social protection; to support their efforts by partnering through innovative platforms for an programs that reduce poverty directly; and to increase access enlightened dialogue and action on the ground, as well as by to education, health, and public infrastructure. Major new supporting South–South cooperation. lending in fiscal 2008 included $83 million to the Brazil In February 2008, more than 100 legislators from the Group Family Health Extension program to train family health care of Eight (G8) countries and five emerging economies (Brazil, workers to provide basic health care to urban residents, a China, India, Mexico, and South Africa) gathered in Brasilia to $15.7 million grant to the Haiti Community Driven Development participate in a major international forum on climate change, Project, and an $18.5 million IDA loan to Bolivia to expand the the GLOBE G8+5 Legislators Forum. Participating lawmakers quality and coverage of health care services to women and discussed and agreed on a Post-2012 Climate Change children. The Bank also provided support in this area through Framework and a Bio-Fuels Statement. a major regional study on youth at risk. The Bank has been working closely with the World Trade Organization on the Aid for Trade agenda and has participated STRENGTHENING GOVERNANCE in several subregional gatherings that addressed the com- The World Bank is helping countries in Latin America and the petitiveness challenges facing the region. Caribbean develop effective and sustainable ways to promote Along with other partners, the Bank participated in The good governance and transparency through the strengthening Lancet’s series on maternal and child undernutrition, which of country systems, improving accountability for service delivery, was launched in Lima, Peru, in February 2008. The meeting, and monitoring and evaluating results. In Guatemala, the Bank cohosted by the Bill & Melinda Gates Foundation and Johns is continuing to support government efforts to increase trans- Hopkins University, highlighted the urgent need to address parency in public procurement and fiscal management with malnutrition in such countries as Bolivia, Guatemala, a $100 million development policy loan. In Mexico, the Bank Nicaragua, and Peru. (See http://www.worldbank.org/lac.) 48 THE WORLD BANK ANNUAL REPORT 2008 TABLE 2.5 WORLD BANK LENDING TO BORROWERS IN LATIN AMERICA AND THE CARIBBEAN BY THEME AND SECTOR | FISCAL 2003–2008 MILLIONS OF DOLLARS THEME 2003 2004 2005 2006 2007 2008 Economic Management 567.2 111.2 310.4 42.5 54.3 131.8 Environmental and Natural Resource Management 240.3 159.1 841.2 454.0 353.0 664.8 Financial and Private Sector Development 819.8 912.4 729.6 1,518.7 498.9 622.7 Human Development 1,171.7 1,046.7 469.8 502.6 1,022.5 445.5 Public Sector Governance 798.6 672.0 506.2 1,054.2 519.9 943.4 Rule of Law 138.8 270.9 147.9 108.8 97.5 50.1 Rural Development 415.9 249.6 331.7 236.5 415.4 307.5 Social Development, Gender, and Inclusion 123.1 268.9 187.9 282.6 175.4 109.2 Social Protection and Risk Management 1,050.3 926.9 950.4 606.2 419.0 307.0 Trade and Integration 59.6 364.6 233.4 720.3 300.5 224.8 Urban Development 435.2 337.6 457.1 384.1 696.9 853.1 Theme Total 5,820.5 5,319.8 5,165.7 5,910.5 4,553.3 4,660.0 SECTOR Agriculture, Fishing, and Forestry 58.4 379.6 233.4 291.0 83.4 333.5 Education 785.5 218.3 680.0 712.7 369.1 525.3 Energy and Mining 96.2 50.5 212.6 172.8 19.5 266.8 Finance 973.0 405.1 530.0 907.3 286.4 249.5 Health and Other Social Services 1,574.1 1,558.9 443.4 821.8 649.1 436.7 Industry and Trade 183.4 428.0 199.9 569.2 236.3 462.0 Information and Communication 52.4 14.0 44.7 20.8 0.0 0.0 Law and Justice and Public Administration 1,564.9 1,521.3 1,776.0 1,278.8 1,187.8 851.4 Transportation 146.4 675.7 556.4 785.4 1,223.9 1,083.4 Water, Sanitation, and Flood Protection 386.2 68.4 489.5 350.7 497.8 451.3 Sector Total 5,820.5 5,319.8 5,165.7 5,910.5 4,553.3 4,660.0 Of which IBRD 5,667.8 4,981.6 4,904.4 5,654.1 4,353.3 4,353.5 Of which IDA 152.7 338.2 261.3 256.4 200.0 306.5 Note: Effective fiscal 2005, lending includes guarantees and guarantee facilities. REGIONAL PERSPECTIVES 49 MIDDLE EAST AND NORTH AFRICA Algeria Iran, Islamic Republic of Djibouti Iraq Egypt, Arab Republic of Jordan This section also reports on the West Bank and Gaza. For the fifth consecutive year, the Middle East and North Africa in Egypt, and several regional reports focusing on public region experienced strong economic growth, with real GDP financial management. The Bank also launched a flagship increasing 5.7 percent in 2007. Growth was almost evenly report on education in the region, The Road Not Traveled, distributed between the resource-rich and resource-poor which emphasizes the central role of incentives and public economies in the region. As a result of skyrocketing global oil accountability in increasing the effectiveness of reform prices, the region’s export revenues increased 11.6 percent in efforts and meeting sector goals. Work also began on the 2007, reaching $632 billion. The food crisis has hit the region, Arab World Initiative (see box 2.2). a net food importer, hard. IMPROVING EDUCATION AND TRAINING WORLD BANK ASSISTANCE AND REDUCING YOUTH UNEMPLOYMENT The Bank committed $1.5 billion in loans, credits, and grants The Bank is implementing a significant portfolio of activities to the region in fiscal 2008. The Bank is providing technical that seek to increase access to education, lift quality, and support and emergency financial assistance to Djibouti and provide market-relevant skills to graduates. In fiscal 2008, the the Republic of Yemen to help them respond to the food Bank approved a $20 million credit to the Republic of Yemen crisis. In countries with ample food reserves and access to to improve secondary education and increase girls’ access. It capital markets, it is providing advice on agriculture and also approved a $7.5 million loan to Jordan that will focus on food policies. strengthening skills for development. The MNA Education The Bank delivered 44 economic and sector work activities Flagship Report was launched during the year. It has already and 85 nonlending technical assistance activities in fiscal had significant impact: its message on the need for higher 2008. This work included a public expenditure review of Iraq, quality education and greater accountability of education a development policy review and country financial account- systems reverberated throughout the region. A Regional PISA ability assessment of the Arab Republic of Egypt, a gender Analysis and the Syria Education Strategy furthered this assessment for Lebanon, a policy note on women and micro- important agenda. Technical assistance and policy advice finance in Iraq, a report on women workers and competitiveness complement an active lending program. MIDDLE EAST AND NORTH AFRICA FAST FACTS Total population: 0.3 billion Population growth: 1.7% TOTAL FISCAL 2008 TOTAL FISCAL 2008 Life expectancy at birth: 70 years New Commitments Disbursements Infant mortality per 1,000 births: 34 IBRD $1,203 million IBRD $966 million Female youth literacy: 84% IDA $267 million IDA $137 million 2007 GNI per capita: $2,794 Number of people living with HIV/AIDS: 0.4 million Portfolio of projects under implementation as of June 30, 2008: $7 billion Note: Life expectancy at birth and infant mortality rate per 1,000 live births are for 2006; female youth literacy is for 2005; HIV/AIDS data are from the UNAIDS/WHO 2007 AIDS Epidemic Update; other indicators are for 2007 from the World Development Indicators database. 50 THE WORLD BANK ANNUAL REPORT 2008 COUNTRIES ELIGIBLE FOR WORLD BANK BORROWING Lebanon Tunisia Libya* Yemen, Republic of Morocco Syrian Arab Republic *Libya graduated in May 2008. To address the continued problem of youth unemployment, conducting country governance and anticorruption assessments the Bank completed a regional policy note on youth and in Iraq, Lebanon, and the Republic of Yemen. It has also conducted several dissemination and consultation events in increased the use of its standard fiduciary evaluation tools at the region in fiscal 2008. In Egypt, a pilot project addressing the project level. child labor and school dropout interventions resulted in a national high-level workshop to review policies in this area. FOSTERING PRIVATE SECTOR AND The Bank is also conducting similar activities to incorporate FINANCIAL SECTOR DEVELOPMENT gender concerns in Bank operations and to enhance women’s During fiscal 2008, the Bank approved a $500 million loan participation in public life. to support Egypt’s financial sector reform program; a $51 million institutional reform grant to the Republic of SUPPORTING SUSTAINABLE DEVELOPMENT Yemen, a large component of which addresses enhancing the AND MANAGEMENT OF NATURAL RESOURCES business environment; and a $6 million loan to support the Half of the region’s population lives under conditions of water development of exports in Tunisia. It conducted investment stress—and rapid population growth and climate change will climate assessments or updates in Algeria, Egypt, Jordan, further constrict the availability of water. To address the Lebanon, Morocco, the West Bank and Gaza, and the Republic problem, the Bank is stepping up its activities in the sector and of Yemen and performed advisory work on industrial land deepening sector policy dialogue. About half of all commit- reform and industrial land markets, fiscal reforms, access to ments to the water sector in the region focus on water supply finance, and the business regulatory environment in Egypt, and sanitation, with the other half supporting water resource Morocco, and the Republic of Yemen. Private and financial management, irrigation, and related fields. Analytical work and sector development also constitutes an important element of country water assistance strategies have been prepared or are fee-based programs in Libya and the Gulf Cooperation Council under way in most countries in the region. countries. Efforts to improve the business environment continued in IMPROVING GOVERNANCE 2007, with 59 percent of the region’s countries instituting at Governance and administrative reform have moved to the least one positive reform. Egypt and Saudi Arabia ranked forefront of the development debate in the region. Core among the world’s top reformers. issues are the size of the public sector, the lack of adequate transparency and accountability, the mixed quality of regula- ASSISTING PEOPLE IN CONFLICT-AFFECTED COUNTRIES tion, the variable levels of service delivery, and the limited The Bank remains active in Iraq, Lebanon, and the West voice for civil society. In response to these challenges, the Bank and Gaza. In Iraq, it manages a portfolio of more than Bank is supporting governance aspects of public financial $800 million. Activities focus on strengthening service management and civil service reform in Iraq, Morocco, the delivery in a broad range of sectors and assisting the West Bank and Gaza, and the Republic of Yemen. It is providing government in its efforts to improve its public financial analytical services and technical assistance in anticorruption, management. The Bank is also working to improve the fiscal federalism and decentralization, demand-side gover- livelihoods of displaced Iraqis in the Syrian Arab Republic, nance, and right-to-information legislation. The Bank has Lebanon, and Jordan and to enhance their integration with conducted Public Expenditure and Financial Accountability surrounding communities. In Lebanon, the Bank scaled up assessments in most countries in the region, and it is currently its technical and financial assistance in support of the REGIONAL PERSPECTIVES 51 FIGURE 2.11 FIGURE 2.12 MIDDLE EAST AND NORTH AFRICA MIDDLE EAST AND NORTH AFRICA IBRD AND IDA LENDING BY THEME | FISCAL 2008 IBRD AND IDA LENDING BY SECTOR | FISCAL 2008 SHARE OF TOTAL OF $1.5 BILLION SHARE OF TOTAL OF $1.5 BILLION Environmental & Natural Water, Sanitation & Urban Development 14% 4% Resource Management Flood Protection 20% 2% Education Trade & Integration 1% Social Protection & Risk Management 2% 19% Energy & Mining Social Development, Gender & Inclusion 5% Transportation 7% Rural Development 4% Law & Justice & Public Rule of Law 1% Administration 13% Public Sector Information & Governance 14% Communication 1% Financial & Private Sector Industry & Trade 2% Human Development 1% 54% Development Health & Other Social Services 2% 34% Finance country reform program through the First Reform EXPANDING FEE-BASED PROGRAMS Implementation Development Policy Loan. Combined with Rising demand for the Bank’s knowledge services led to the a technical assistance grant, the loan will address reforms establishment of fee-based programs in Algeria, Egypt, and in the electricity and social insurance sectors. The Bank is Libya and the opening of a Bank office in Kuwait in fiscal 2008. also assisting the government of Lebanon in improving the In the Gulf Cooperation Council countries, where it has long livelihoods of Palestinian refugees in Nahed el-Bared camp. provided fee-based services, the Bank is aiming to engage The Bank’s portfolio in the West Bank and Gaza includes more strategically. Toward that end, the Kuwaiti and Saudi 13 projects whose goals are to improve the living conditions technical cooperation programs are transitioning to a multi- for Palestinian people, such as water and sanitation, sectoral programmatic approach that aims to increase policy education, and municipal finance. In fiscal 2008, the Bank implementation support. Similar approaches are gaining approved $40 million in budget support as part of a package momentum in Bahrain, Oman, and Qatar and are being of donor support for the Palestinian Reform and explored in the United Arab Emirates. (See http://www Development Plan for 2008–2010. .worldbank.org/mna.) BOX 2.2 THE ARAB WORLD INITIATIVE The Arab World Initiative aims to accelerate the integration of • Private job creation the Arab world into the global economy to spur growth, • Efficient, effective, and transparent allocation and create better jobs, reduce disparities within the region, management of public resources for development increase social inclusion, and better manage natural • Inclusion of women, youth, minorities, and the poor resources. Recognizing that countries in the Arab world have been underserved, the Bank Group has launched consulta- • Higher quality and relevance of education tions with a broad range of stakeholders to identify develop- • Better management of natural resources, especially ment priorities. To further this initiative, Bank activities water in the Arab world will focus on support for the following main goals: Achievements to date include support for the establish- ment of the Arab Water Academy and the cosponsoring • Development of physical and institutional infrastructure of a conference on Strengthening the Pan Arab Free for trade and economic diversification Trade Area. 52 THE WORLD BANK ANNUAL REPORT 2008 TABLE 2.6 WORLD BANK LENDING TO BORROWERS IN THE MIDDLE EAST AND NORTH AFRICA BY THEME AND SECTOR | FISCAL 2003–2008 MILLIONS OF DOLLARS THEME 2003 2004 2005 2006 2007 2008 Economic Management 0.0 0.0 45.8 0.0 0.0 0.0 Environmental and Natural Resource Management 186.0 113.8 160.2 44.5 179.7 65.0 Financial and Private Sector Development 48.3 259.3 166.6 907.8 166.7 778.0 Human Development 140.9 192.1 95.4 128.5 14.3 17.2 Public Sector Governance 106.6 19.6 166.0 229.0 59.8 208.0 Rule of Law 48.0 1.7 1.8 46.9 33.0 11.2 Rural Development 100.6 65.1 155.3 177.9 126.6 53.3 Social Development, Gender, and Inclusion 63.1 70.7 123.0 67.8 174.9 75.5 Social Protection and Risk Management 96.1 31.6 98.5 69.7 15.4 35.7 Trade and Integration 3.6 158.3 0.0 0.0 16.0 17.2 Urban Development 262.7 178.7 271.1 28.5 121.6 208.8 Theme Total 1,056.0 1,091.0 1,283.6 1,700.6 907.9 1,469.8 SECTOR Agriculture, Fishing, and Forestry 196.7 27.2 229.2 15.3 208.5 0.0 Education 154.3 154.9 124.0 146.8 14.3 32.0 Energy and Mining 0.0 0.0 0.0 316.5 291.6 280.0 Finance 1.9 20.8 142.5 625.0 39.2 500.3 Health and Other Social Services 124.2 52.0 0.3 0.0 84.3 27.3 Industry and Trade 74.3 23.4 277.9 14.0 10.3 29.4 Information and Communication 2.3 0.0 18.5 0.0 0.0 9.0 Law and Justice and Public Administration 213.6 93.6 232.9 249.2 61.9 189.6 Transportation 107.9 409.6 29.0 237.6 27.4 104.7 Water, Sanitation, and Flood Protection 180.9 309.5 229.3 96.4 170.5 297.6 Sector Total 1,056.0 1,091.0 1,283.6 1,700.6 907.9 1,469.8 Of which IBRD 855.6 946.0 1,212.1 1,333.6 691.9 1,202.5 Of which IDA 200.4 145.0 71.5 367.0 216 267.3 Note: Effective fiscal 2005, lending includes guarantees and guarantee facilities. REGIONAL PERSPECTIVES 53 3 SUMMARY OF FISCAL YEAR ACTIVITIES WORLD BANK LENDING FIGURE 3.1 The World Bank mobilizes financing by borrowing from TOTAL IBRD-IDA LENDING BY REGION | FISCAL 2008 SHARE OF TOTAL LENDING OF $24.7 BILLION international capital markets (for IBRD) and by allocating grants and credits using contributions from richer member South Asia 17% 23% Africa countries (for IDA). It channels these resources to benefit poor people in borrowing member countries. Lending is tailored to individual country needs, using Middle East & lending instruments that are becoming increasingly flexible. North Africa 6% Figures 3.1–3.3 and table 3.1 summarize combined IBRD-IDA 18% East Asia & Pacific lending in fiscal 2008. LOW-INCOME COUNTRIES Latin America & the Caribbean 19% 17% Europe & Central Asia The Role of IDA IDA is the largest multilateral channel of concessional financing to the world’s poorest countries. In fiscal 2008, countries with annual per capita income of up to $1,065 were FIGURE 3.2 eligible for IDA assistance. In addition, IDA supports some TOTAL IBRD-IDA LENDING BY THEME | FISCAL 2008 countries, including several small island economies, that SHARE OF TOTAL LENDING OF $24.7 BILLION are above the income cutoff but lack the creditworthiness Urban Development 12% 2% Economic Management needed to borrow from IBRD. To date, 23 countries have Environmental & Natural graduated from IDA. Some of these, most recently China 11% Resource Management and the Arab Republic of Egypt, have now become IDA Trade & Integration 5% donors. The allocation of IDA’s resources is determined Social Protection & primarily by each recipient’s rating in the annual Country Risk Management 4% Financial & Social Development, Private Sector Policy and Institutional Assessments. The chief IDA Gender & Inclusion 4% 25% Development concern is Sub-Saharan Africa; therefore, its countries are recommended for priority in the allocation process. Rural Development 9% In the case of countries that are eligible for both IDA and Rule of Law 1% IBRD funds, IDA allocations must also take into account those countries’ creditworthiness for and access to other Public Sector Governance 18% 9% Human Development sources of funds. IDA supports countries’ efforts to boost economic growth, reduce poverty, and improve the living conditions of the poor. In its operational work, it faces a full spectrum of country FIGURE 3.3 conditions, including postconflict reconstruction, economic TOTAL IBRD-IDA LENDING BY SECTOR | FISCAL 2008 transition, vulnerability, and rapid and sustained growth. SHARE OF TOTAL LENDING OF $24.7 BILLION While continuing to support all low-income countries, IDA is Water, Sanitation & Agriculture, Fishing expected to direct half of its financial assistance in the next Flood Protection 10% 6% & Forestry three years to Sub-Saharan Africa, subject to performance. Significant assistance will also be directed to the poorest 8% Education countries in South and East Asia. IDA commitments in fiscal 2008 reached $11.2 billion (see figure 3.4). This funding, including $7.8 billion in credits and Transportation 19% 17% Energy & Mining $3.4 billion in grants, supported 199 operations. The largest share of IDA resources was committed to Africa, which received $5.7 billion, or 50 percent of total IDA commit- Law & Justice & 6% Finance ments. South Asia ($2.8 billion) and East Asia and Pacific Public Administration 21% Health & 7% Social Services ($1.8 billion) also received large shares of total funding. Vietnam and India were the largest single recipients of funding. Information & Communication <1% 6% Industry & Trade SUMMARY OF FISCAL YEAR ACTIVITIES 55 FIGURE 3.4 FIGURE 3.5 TOTAL IDA COMMITMENTS BY REGION | FISCAL 2008 IDA COMMITMENTS TO AFRICA | FISCAL 1998–2008 SHARE OF TOTAL LENDING OF $11.2 BILLION South Asia 25% 50% Africa Millions of dollars Percent 7,000 60 6,000 50 5,000 Middle East & 40 North Africa 2% 4,000 30 3,000 Latin America & 20 the Caribbean 3% 2,000 Europe & 10 1,000 Central Asia 4% 0 0 East Asia & Pacific 16% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 IDA commitments (left axis) Share of IDA commitments (right axis) Note: Effective fiscal 2005, lending includes guarantees and guarantee facilities. The largest commitments went to the public admini- stration sector (including law and justice), which received $2.9 billion in financing (26 percent of the total). IDA has FIGURE 3.6 become one of the major sources of financing for infra- TOTAL IDA COMMITMENTS BY THEME | FISCAL 2008 SHARE OF TOTAL LENDING OF $11.2 BILLION structure, including energy and mining; transportation; water, sanitation, and flood protection; and information Urban Development 10% 2% Economic Management and communications technologies sectors, whose share Environmental & Natural 7% Resource Management in total official development assistance flows has declined Trade & Integration 5% in recent years despite enormous need. Combined, these Social Protection & Financial & sectors received $4.3 billion, 39 percent of the total IDA Risk Management 4% Private Sector 15% Development commitments. Significant support was also provided to Social Development, the education ($1.2 billion) and agriculture ($1 billion) Gender & Inclusion 8% sectors. Human The themes receiving the most funding were public sector 14% Development governance ($2.3 billion), financial and private sector develop- Rural Development 15% ment ($1.7 billion), and rural development ($1.6 billion). Major attention was also paid to human development ($1.7 billion) Rule of Law 1% 19% Public Sector Governance and urban development ($1.1 billion). Figures 3.4–3.7 sum- marize IDA lending for fiscal 2008, and figure 3.8 looks at IDA lending in relation to infrastructure. FIGURE 3.7 TOTAL IDA COMMITMENTS BY SECTOR | FISCAL 2008 IDA Resources SHARE OF TOTAL LENDING OF $11.2 BILLION IDA is financed largely by contributions from donor govern- Water, Sanitation & Agriculture, Fishing ments (figure 3.9). Additional financing includes transfers Flood Protection 9% 9% & Forestry from IBRD’s net income, grants from IFC, and borrowers’ repayment of earlier IDA credits. Every three years, donor governments and representatives Transportation 16% 11% Education of borrower countries meet to discuss IDA’s policies and priorities and to agree on the amount of new resources required to fund its lending program over the following three 13% Energy & Mining years. The major issues discussed during this fiscal year’s replenishment meetings were climate change, IDA’s role Law & Justice & Public 4% Finance in strengthening harmonization and alignment to enhance Administration 26% Health & Other 8% Social Services country-level effectiveness, and a focus on results by evaluat- ing the IDA14 measurement system and by establishing Information & Communication <1% 4% Industry & Trade 56 THE WORLD BANK ANNUAL REPORT 2008 TABLE 3.1 WORLD BANK LENDING BY THEME AND SECTOR | FISCAL 2003–2008 MILLIONS OF DOLLARS THEME 2003 2004 2005 2006 2007 2008 Economic Management 777.7 428.8 594.6 213.8 248.3 396.6 Environmental and Natural Resource Management 1,102.6 1,304.6 2,493.8 1,387.3 2,017.0 2,661.8 Financial and Private Sector Development 2,882.9 4,176.6 3,862.0 6,137.8 4,260.8 6,156.2 Human Development 3,374.0 3,079.5 2,951.0 2,600.1 4,089.4 2,280.9 Public Sector Governance 2,464.1 3,373.9 2,636.4 3,820.9 3,389.7 4,346.6 Rule of Law 530.9 503.4 303.8 757.6 424.5 304.2 Rural Development 1,910.9 1,507.8 2,802.2 2,215.8 3,175.7 2,276.8 Social Development, Gender, and Inclusion 1,003.1 1,557.8 1,285.8 1,094.1 1,250.3 1,002.9 Social Protection and Risk Management 2,324.5 1,577.0 2,437.6 1,891.7 1,647.6 881.9 Trade and Integration 566.3 1,212.7 1,079.9 1,610.9 1,569.9 1,393.2 Urban Development 1,576.3 1,358.1 1,860.0 1,911.2 2,622.7 3,001.2 Theme Total 18,513.2 20,080.1 22,307.0 23,641.2 24,695.8 24,702.3 SECTOR Agriculture, Fishing, and Forestry 1,213.2 1,386.1 1,933.6 1,751.9 1,717.4 1,360.6 Education 2,348.7 1,684.5 1,951.1 1,990.6 2,021.8 1,926.6 Energy and Mining 1,088.4 966.5 1,822.7 3,030.3 1,784.0 4,180.3 Finance 1,446.3 1,808.9 1,675.1 2,319.7 1,613.6 1,540.7 Health and Other Social Services 3,442.6 2,997.1 2,216.4 2,132.3 2,752.5 1,607.9 Industry and Trade 796.7 797.9 1,629.4 1,542.2 1,181.3 1,543.5 Information and Communication 115.3 90.9 190.9 81.0 148.8 56.5 Law and Justice and Public Administration 3,956.5 4,978.8 5,569.3 5,857.6 5,468.2 5,296.4 Transportation 2,727.3 3,777.8 3,138.2 3,214.6 4,949.0 4,829.9 Water, Sanitation, and Flood Protection 1,378.3 1,591.6 2,180.3 1,721.0 3,059.4 2,359.9 Sector Total 18,513.2 20,080.1 22,307.0 23,641.2 24,695.8 24,702.3 Of which IBRD 11,230.7 11,045.4 13,610.8 14,135.0 12,828.8 13,467.6 Of which IDA 7,282.5 9,034.6 8,696.2 9,506.2 11,866.9 11,234.7 Note: Effective fiscal 2005, lending includes guarantees and guarantee facilities. SUMMARY OF FISCAL YEAR ACTIVITIES 57 FIGURE 3.8 FIGURE 3.9 IDA’s CONSISTENT COMMITMENT TO INFRASTRUCTURE SOURCES OF IDA FUNDING | FISCAL 1998–2008 BILLIONS OF DOLLARS 25.2 Millions of dollars Percent 4,500 45 4,000 40 17.7 3,500 35 3,000 30 12.3 2,500 25 9.2 9.0 2,000 20 6.3 6.3 1,500 15 3.8 3.9 2.1 1,000 10 0.9 n.a. 500 5 IDA13 FY03–05 IDA14 FY06–08 IDA15 FY09–11 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 IDA internal resources a IDA commitments (left axis) Share of IDA commitments (right axis) IBRD and IFC net income contribution Donor compensation for MDRI debt forgiveness Note: Fiscal 2005–2008 includes guarantees and guarantee facilities. Donor contributionsb Note: n.a. ϭ not applicable. a. IDA internal resources include principal repayments, charges less evaluation directions for the current replenishment to make administrative expenses, and investment income. IDA more effective. b. Net of structural financing gap. Historically, the major industrial nations have been the largest contributors to IDA, but donor nations also include introduced in 2006. For the 41 countries currently identified developing countries and transition economies—some of as HIPCs, the total debt relief to be delivered by IDA under them current IBRD borrowers and former IDA borrowers. HIPC and by MDRI is estimated at $18 billion and $37 bil- Negotiations over the 15th Replenishment of IDA (IDA15) were lion, respectively. concluded in December 2007, with record pledges of $41.7 bil- Under the Debt Reduction Facility for IDA-only countries, lion (equivalent to special drawing rights of 27.3 billion). Donors two implementation grants (for Mozambique and Nicaragua) pledged new financing of an unprecedented $25.2 billion, with were closed in fiscal year 2008, extinguishing just under 30 percent of donors raising their contributions. These contri- $1.5 billion of commercial external debt in terms at least butions were complemented by $16.5 billion of funding from as favorable as those provided by other creditors under the previous pledges for financing the cost of debt relief; IDA’s HIPC Initiative. In the case of Mozambique, 100 percent of credit reflows and investment income; and internal financing the eligible claims were tendered and extinguished. In the from the World Bank Group, which pledged to contribute case of Nicaragua, creditors representing 95 percent $3.5 billion from IBRD net income and IFC retained earnings, of the eligible claims participated in the operation, including more than twice the amount provided under IDA14. In IDA15, the four creditors that had obtained court judgments against $9.1 billion of the total financial envelope comes from donor- Nicaragua. financed compensation of credit reflows forgone by IDA’s To help countries maintain debt sustainability, IDA has provision of debt relief. This includes costs incurred during developed a system—already adopted by some other multi- IDA14 related to IDA’s Multilateral Debt Relief Initiative (MDRI) lateral development banks—for allocating grants based on ($6.3 billion); IDA’s Heavily Indebted Poor Countries (HIPC) countries’ risk of debt distress as assessed under the Debt Initiative ($1.7 billion); and to the financing of arrears clear- Sustainability Framework for Low Income Countries. The ance operations ($1.1 billion). This illustrates the increased approach helps mitigate the risk of debt distress in the dependence of IDA on donor financing necessitated by debt future. IDA is also working with the IMF to support debt relief initiatives. management in IDA-only countries through the provision of technical assistance in designing medium-term debt man- Debt Issues in Low-Income Countries agement strategies. This work has been complemented by Since 1996, when the Bank and the IMF launched the IDA’s Debt Management Performance Assessment tool, a HIPC Initiative, IDA has provided more than $5 billion in methodology for identifying strengths and weaknesses in debt relief to 33 countries. It has also provided more than debt management operations through a comprehensive set $27 billion in debt forgiveness of principal under MDRI, of indicators. 58 THE WORLD BANK ANNUAL REPORT 2008 Regional and Global Efforts Building Commission. Consultations with the UN on a IDA’s strengths at the country level enable it to address regional partnership framework were also initiated. and global issues. Issues such as prevention and control of As part of the IDA15 replenishment process, the period of HIV/AIDS, environmental preservation, regional and global exceptional allocation was extended from seven to ten years trade integration, and global financial stability ultimately need for postconflict countries and from three to five years for to be tackled at the country level. By leveraging its country- reengaging countries. Furthermore, a systematic approach to focused assistance and policy dialogue, IDA helps to integrate arrears clearance was approved that will facilitate the process regional and global priorities into country strategies. At the of normalization with the Bank for conflict-affected countries same time, through its involvement in global policy making, with arrears. coupled with its intensive activities in the field, IDA supports the Between July 2007 and June 2008, Bank commitments alignment of national, regional, and global priorities. to fragile and postconflict countries exceeded $2.2 billion. IDA has the strengths to help raise the effectiveness of During the same period, the Post Conflict Fund and Low official development assistance and tackle the new challenges Income Countries Under Stress Trust Fund financed 25 proj- created by the shifting aid architecture. To achieve these ects worth $29.8 million. These two funds were merged into a objectives, IDA must focus on improvement in four main areas: new, multiyear State- and Peace-Building Fund, approved in strengthening complementarity with vertical approaches to aid April 2008. The fund’s first-year budget of $33 million was delivery; ensuring appropriate sectoral funding; addressing approved in June 2008. critical global challenges, particularly climate change; and The Bank is implementing a strategy to increase field enhancing alignment and harmonization. IDA is working to presence, strengthen the ability in sectors to document reform and update its operational policies to improve effective- lessons learned and deploy experienced staff between ness and therefore its ability to meet these challenges. regions and country programs, establish specialized institu- tional backup teams for emergency projects, and enhance Fragile and Conflict-Affected Countries incentives for staff working in and on fragile and conflict- Following the approval in February 2007 of a new policy affected countries. Finally, the Board approved the Bank’s framework on rapid response and on strengthening the new compensation policy, which supports decentralization Bank’s engagement in fragile and conflict-affected countries, and facilitates the placement of staff in fragile states the Fragile and Conflict-Affected Countries Group was through an enhanced compensation package. Work on created in July 2007, subsuming the conflict and fragility a complementary package of nonfinancial incentives is agendas. During fiscal 2008, the Bank deepened its coopera- under way. tion with international partners in addressing the needs of countries facing such challenges. At the Annual Meetings in MIDDLE-INCOME COUNTRIES October 2007, the Heads of Multilateral Development Banks Middle-income countries face substantial development agreed on a more harmonized approach to their engagement challenges. They must sustain growth that provides productive in fragile situations. During the year, the United Nations employment while reducing poverty and inequality. They Development Group and the Bank consolidated their work on must manage macroeconomic risks stemming from volatile joint postconflict needs assessments and finalized a joint capital flows, contingent liabilities, financial markets, and guidance note on integrated recovery planning. The Bank also pensions. They must build crisis-management capability engaged actively in deliberations of the United Nations Peace to deal with global threats. They must enhance their ECONOMIC RESEARCH FORUM As part of an initiative to strengthen the Bank’s engagement with the growth and diversification in the presence of large oil rents; achieving Arab world and enhance the Bank’s knowledge and learning agenda, the stronger and more vibrant regional integration; understanding and Development Economics Vice Presidency and regional partners launched responding to the challenges of increased inequality; and dealing with a new initiative in fiscal 2008. Partly funded through a Development water scarcity, climate change, and other severe environmental Grant Facility grant, the Research Initiative for Arab Development will be problems. An important component of the initiative is the dissemination implemented by the Economic Research Forum, a regional network of of this knowledge in order to build consensus and encourage better researchers based in Cairo. policy making in the region. Through the initiative, a broader cadre of researchers from the region will become actively involved in policy The expected outcomes are a broader and higher-quality knowledge base debates, strengthening the platform for better decision making. that is relevant for high-priority themes, such as increasing economic SUMMARY OF FISCAL YEAR ACTIVITIES 59 competitiveness, adopt clean energy, ensure environmental FIGURE 3.10 sustainability, and strengthen the institutional and governance TOTAL IBRD LENDING BY REGION | FISCAL 2008 SHARE OF TOTAL LENDING OF $13.5 BILLION structures that underpin viable market-based economies. The Bank is uniquely placed to help middle-income countries deal South Asia 11% <1% Africa with all of these challenges through IBRD. Middle East & North Africa 9% The Role of IBRD 20% East Asia & Pacific IBRD is a triple-A-rated financial institution with some unusual characteristics. Its shareholders and clients are sovereign governments, each of which has a voice in setting IBRD’s policies. As a global development cooperative, IBRD’s purpose is to help members achieve equitable and sustainable growth in their economies and find solutions Latin America & to regional and global problems in economic development the Caribbean 32% 28% Europe & Central Asia and environmental sustainability, all with a view to reducing poverty and improving standards of living. IBRD pursues these goals by providing financing, risk management products, and other financial services; specialized expertise; FIGURE 3.11 and strategic and convening services as requested by its TOTAL IBRD LENDING BY THEME | FISCAL 2008 SHARE OF TOTAL LENDING OF $13.5 BILLION members. Urban Development 14% 1% Economic Management IBRD Financial Services New lending commitments by IBRD rose in fiscal 2008 to Trade & Integration 6% Environmental & Natural 14% Resource Management $13.5 billion for 99 operations. Development-policy lending Social Protection & represented 29 percent of total IBRD lending, up slightly from Risk Management 3% 28 percent in fiscal 2007. Social Development, Gender & Inclusion 1% Latin America and the Caribbean received the largest Financial & Rural Development 5% Private Sector share of IBRD lending, with $4.4 billion (32 percent of total Rule of Law 2% 34% Development IBRD commitments). It was followed by Europe and Central Asia, which received $3.7 billion (28 percent) in funding, and East Asia and Pacific, which received $2.7 billion (20 percent). Lending was less concentrated in fiscal 2008. Whereas the Public Sector Governance 15% 5% Human Development largest five countries received 56 percent of total lending in fiscal 2007, five countries—Azerbaijan, Brazil, China, India, and Turkey—received combined commitments of 53 percent FIGURE 3.12 of total IBRD lending in fiscal 2008. TOTAL IBRD LENDING BY SECTOR | FISCAL 2008 The transportation sector received the largest share of IBRD SHARE OF TOTAL LENDING OF $13.5 BILLION lending ($3 billion), followed by the energy and mining sector Water, Sanitation & ($2.8 billion) and the public administration, including law Flood Protection 10% 3% Agriculture, Fishing & Forestry and justice, sector ($2.4 billion). The thematic composition of 5% Education lending was led by financial and private sector development ($4.5 billion), followed by public sector governance ($2.1 billion), urban development ($1.9 billion), and environmental 20% Energy & Mining Transportation 23% and natural resource management ($1.9 billion). Figures 3.10–3.12 show IBRD lending by region, theme, and sector. Development policy–based lending commitments 8% Finance are shown on the accompanying CD-ROM. Health & Other IBRD offers risk management products for clients to 5% Social Services manage risks related to currency, interest rate, commodity Law & Justice & 8% Industry & Trade price, and natural disasters. In fiscal 2008, it executed Public Administration 18% <1% Information & Communication 60 THE WORLD BANK ANNUAL REPORT 2008 USDeq (US dollar equivalent) 4.2 billion hedging transac- FIGURE 3.13 tions on behalf of clients. This included interest rate IBRD’S BORROWINGS AND INVESTMENTS | AS OF JUNE 30, 2008 BILLIONS OF DOLLARS hedges of USDeq 3.3 billion, and currency hedges of USDeq 0.9 billion, of which USDeq 154 million were local 103.3 currency conversions. 91.5 91.6 81.1 80.7 IBRD Resources IBRD obtains most of its funds by selling bonds in interna- tional capital markets. In fiscal 2008, it raised $19 billion at medium- to long-term maturities. Debt securities, with a wide range of maturities and structures, were issued in 31.1 26.4 24.9 19 currencies. 22.2 23.0 IBRD is able to borrow high volumes on very favorable terms. IBRD’s strength is based on its prudent financial policies and practices, which help maintain its high credit FY04 FY05 FY06 FY07 FY08 rating. As a cooperative institution, IBRD seeks not to Cash and liquid investments Borrowings outstanding after swaps maximize profit but to earn enough income to ensure its financial strength and to sustain its development activities. IBRD’s operating income was $2,271 million FIGURE 3.14 in fiscal 2008. IBRD retained $811 million in its general reserve, EQUITY-TO-LOANS RATIO | AS OF JUNE 30, 2008 PERCENT $117 million in its pension reserve, and $10 million in 40 37.6 its externally financed outputs adjustment account, and 35.0 33.0 it added $750 million to the surplus account. In August 31.4 29.4 2007, the Executive Directors proposed that the Board of Governors approve a transfer of $583 million to IDA from allocable net income in fiscal 2008 (see “Financial Statements” on the CD-ROM). IBRD maintained adequate liquidity in fiscal 2008 to ensure its ability to meet its obligations. As of June 30, 2008, it held about $23 billion in liquid assets. Also as of June 30, 2008, IBRD’s outstanding borrowings from 0 capital markets were about $80.7 billion (net of swaps) FY04 FY05 FY06 FY07 FY08 (figure 3.13). Total disbursed and outstanding loans were $99 billion. Consistent with IBRD’s development mandate, the princi- with civil society organizations, development partners, and pal risk it takes is the country credit risk inherent in its other stakeholders. It assesses the country’s development portfolio of loans and guarantees. Risks related to interest challenges and priorities and lays out a program of lending and exchange rates are minimized. One summary measure and nonlending activities to support the country’s develop- of the Bank’s risk profile is the ratio of equity to outstanding ment efforts. During fiscal 2008, the Bank prepared 49 CAS net loans, which is closely managed in line with the Bank’s products, including 18 CAS progress reports and nine interim financial and risk outlook. This ratio stood at 37.6 percent as strategy notes, which are prepared when a country assistance of June 30, 2008 (figure 3.14). strategy cannot be prepared because of specific country circumstances. Of these, 12 were prepared jointly with IFC, NONLENDING ACTIVITIES and several were prepared collaboratively with other donors. Country Assistance Strategies A country assistance strategy (CAS) guides Bank Group Strategy Development activities within a borrowing member country. Starting with a In September 2007, the “Sector Strategy Implementation country’s vision of its development goals, a CAS is prepared in Update” (SSIU) was presented to the Executive Directors’ close cooperation with the government and in consultation Committee on Development Effectiveness. The SSIU provides SUMMARY OF FISCAL YEAR ACTIVITIES 61 an overview of the Bank’s strategic focus and the delivery of was coordinated, compared with approximately 40 percent the work program across all 17 sectors and thematic areas in in fiscal 2007. which the Bank is engaged. In addition, the fiscal 2008 SSIU reported on the strategies for four sectors: environment, Research forestry, social protection, and transport. The Bank’s research group aims to provide practitioners with A concept and issues note, “Towards a Strategic Framework original knowledge to inform policy discussions and ultimately on Climate Change and Development for the World Bank to help solve development problems. Bank research is a key Group,” was presented to the Development Committee in source of information and understanding on development February 2008. The document included a progress report on issues for outside researchers and the policy community. the Clean Energy Investment Framework. The Bank also In fiscal 2008, the research group conducted in-depth published a draft “Sustainable Infrastructure Action Plan, research on over 70 developing countries as well as cross- FY09–10,” which was presented to the Development country comparative work. The group published 25 new Committee in April 2008. In addition, the Governance and books, 175 journal articles, and 90 book chapters. The topics Anticorruption Implementation Plan went to the Board in included China and India in the global economy; volatility and September 2007, and a first-year progress report on the growth; terrorism, political openness, and development; Gender Action Plan was discussed in March 2008. Finally, postconflict transitions; donor fragmentation; access to an approach paper to revamp sector and results reporting was finance; finance in Africa; microenterprises; various aspects submitted to the Development Committee in June 2008 and of trade; migration and women; child health; land reform; discussed in July 2008. inequality of opportunity; the urbanization of poverty; and the impacts of climate change. Evaluative research has become a theme of the group’s Economic and Sector Work and work. During the year, the group’s impact evaluations advanced Nonlending Technical Assistance across a range of sectors, including groundbreaking work to Economic and sector work (ESW) and nonlending technical measure the effectiveness and reach of conditional cash transfer assistance (TA) are the Bank’s two largest nonlending product programs and other social service delivery mechanisms. lines. The Bank delivered 489 ESW and 513 TA activities in The group puts great weight on its data and software fiscal 2008. TA deliveries have been increasing, surpassing products. New and updated data sets were further improved the total number of ESW activities this year. More than half of in fiscal 2008 to help users monitor poverty, assess trade total TA activities focused on providing operational guidance and financial regulations, and measure governance. (See on formulating and implementing policies and programs. http://www.econ.worldbank.org/research.) Law and justice and public administration, and finance were the two leading sectors for both ESW and TA activities. World Bank Institute The Bank continues to coordinate ESW with development The World Bank Institute (WBI) is one of the World Bank’s partners and clients as committed in the Paris Declaration. capacity development instruments. It identifies countries’ Preparation of about half of all ESW delivered in fiscal 2008 capacity needs and develops learning activities to address HOW WELL DID BANK ACTIVITIES PERFORM? According to the Bank’s Quality Assurance Group, drawing on data from the weaker performance of country programs, which were rated about Independent Evaluation Group, 76 percent of projects completed in fiscal 60 percent satisfactory based on the country assistance evaluations 2007 had satisfactory development outcomes, compared with 83 percent conducted during the past 10 years. It also finds outcomes at the sector in fiscal 2006, 81 percent in fiscal 2005, and 77 percent in fiscal 2004. level to be lower than project outcomes, especially in rural development, Declines in outcomes were evident in the Africa region, as well as in health, public sector governance, and private sector development. Weaknesses in nutrition, and population; public sector governance; and finance and program design were the main factors leading to lower sector outcomes. private sector development. Fragile states continue to pose challenges, While the overall quality of analytic and advisory activities was satis- with only 62 percent of completed operations between fiscal years 2004 and factory, the likely impact was considered weak, mainly because of 2007 producing satisfactory development outcomes. The fiscal 2008 Annual inadequate dialogue and dissemination of results to country partners. Report on Portfolio Performance (ARPP) will be available in early 2009. Given that the share of analytic and advisory activities in country services The fiscal 2007 ARPP notes the apparent inconsistency between the expenditures now surpasses that of lending, improving their efficiency somewhat better aggregate performance of lending and the much and impact requires greater management attention. 62 THE WORLD BANK ANNUAL REPORT 2008 them. Courses and retreats cover numerous topics, from the resulted in individual learning gains but had less impact in environment to financial sector regulation, from public- affecting workplace behavior or strengthening institutional private partnerships in infrastructure to water resources capacity. One key lesson here is that organizational and management and rural development. In fiscal 2008, WBI institutional context must be conducive to individual learning if delivered some 570 learning activities and reached more than development capacity is to be achieved. The evaluation also 39,500 participants, 34 percent of whom were women and highlighted the importance of well-designed and -targeted 27 percent of whom were from Africa. training content and strong country commitment. Among the most prominent of WBI’s global programs are those in governance, anticorruption, and knowledge for GLOBAL CONNECTIONS development (K4D). The K4D program assesses the prepared- Global and regional partnerships are increasing because of ness of a country or region to compete in the global knowl- the growing integration of the world’s economies and the edge economy on the basis of WBI’s Knowledge Assessment existence of development challenges that cut across national Methodology (KAM). The 2008 KAM identifies specific areas boundaries. These partnerships promote collaboration in where policy makers may need to focus more attention areas of common concern such as combating communicable to increase their countries’ competitiveness. (See http:// diseases, preserving the environment, fostering agricultural go.worldbank.org/AW9KZWJB10.) In fiscal 2008, the K4D research, acquiring and sharing knowledge, integrating trade, program published a comprehensive global report on Building addressing international migration issues, and developing Knowledge Economies: Advanced Strategies for Development, infrastructure. The Bank is also continuing its work with and a report on Enhancing China’s Competitiveness through development partners on cooperative measures that minimize Lifelong Learning. the cost of delivering aid and thereby increase aid effective- With the Development Economics group, WBI launched the ness. The Bank currently participates in some 194 global and seventh release of the Worldwide Governance Indicators, regional partnerships; nearly $187 million from the Bank’s representing a decade-long effort by researchers to build the own resources has been disbursed in fiscal 2008 to support most comprehensive cross-country set of governance indica- global and regional partnerships as of the end of fiscal 2008. tors currently available to the public. Covering 212 countries The Bank plays different roles in these initiatives, including and territories, the indicators are widely used by policy makers as a trustee of donor funds, a financial contributor, and an and researchers. (See http://www.govindicators.org.) implementing agency. WBI also provides an environment for knowledge innovation on frontier issues in development. One such topic is Diaspora Global Development Learning Network Networks—highly skilled people who have emigrated from Launched in 2000, the Global Development Learning Network developing countries. The members of such networks can (GDLN) is a partnership of more than 120 learning centers provide a bridge between developing countries and global (known as Affiliates) in 80 countries. GDLN Affiliates collabo- state-of-the-art solutions in policy, technological, and rate in designing customized learning solutions for people managerial expertise by sharing knowledge and leading working in development around the world. Offering formal investment initiatives in their countries of origin. WBI is piloting training courses, multicountry dialogues, and virtual a number of operational mechanisms for leveraging a country’s conferences that blend face-to-face and distance-learning expatriate talent abroad by identifying and nurturing these approaches, GDLN Affiliates enable individuals, teams, and networks of highly successful professionals. Some have already organizations anywhere in the world to communicate, share shown results in the area of innovation systems, for example, in specialized knowledge, and learn from each others’ experi- Argentina, Armenia, Chile, Mexico, and South Africa. ences in a timely and cost-effective manner. In addition, WBI published a unique interactive trade The GDLN hosted more than 1,000 learning events in fiscal database: the “World Trade Indicators.” This tool benchmarks 2008, reaching some 100,000 people worldwide in govern- a country’s historical and current trade performance through ment agencies, private sector entities, academia, and 2007 along multiple policy, institutional, and outcome dimen- nongovernmental organizations. (See http://www.gdln.org.) sions. (See http://www.worldbank.org/wti2008.) Trust Funds Project-Based and Client Training Trust funds administered by the Bank Group have emerged as IEG evaluated client training activities in Using Training to key vehicles for channeling official development assistance. Build Capacity for Development: An Evaluation of the World As of the end of fiscal 2008, the Bank Group held a total of Bank’s Project-Based and WBI Training—the Bank’s primary $26.3 billion in trust ($16.9 billion in cash and $9.4 billion in instrument for capacity building. Bank-financed client training promissory notes), which it administered through 1,021 active SUMMARY OF FISCAL YEAR ACTIVITIES 63 TABLE 3.2 Fund to Fight AIDS, Tuberculosis, and Malaria; the Global TOP TEN TRUST FUND DONORS | FISCAL 2008 Alliance for Vaccines and Immunization; the Global MILLIONS OF DOLLARS Environment Facility; and Carbon Finance. In recognition of the rapidly growing trust funds portfolio DONOR 2007 2008 and the need to strengthen its management, the Bank’s United Kingdom 1,190 1,075 Board of Executive Directors approved a Trust Fund Management Framework in October 2007. This framework United States 747 760 aims to promote a more strategic approach to ensure relevance and rigor in the selection of different types of Italy 79 749 trust funds, consistent with the Bank’s business needs; to France 288 736 strengthen risk management and controls; and to enhance operational efficiency and sustainability, including through a European Commission 652 685 new trust fund fee structure. Reforms and policies imple- Netherlands 766 677 mented by the framework are being mainstreamed into the Bank’s operational policies and procedures. Canada 533 516 Germany 332 505 Cofinancing Cofinancing is any arrangement under which funds from the Norway 209 443 Bank are associated with funds provided by sources outside Japan 412 402 the recipient country for a specific lending operation. In fiscal 2008, 84 Bank projects leveraged $4.29 billion in cofinancing. Others 2,126 2,215 Major cofinanciers were the Japan Bank for International Cooperation ($690 million) and the UK Department for Interna- Total 7,334 8,763 tional Development ($590 million). The three regions that benefited the most were East Asia and Pacific ($940 million), Note: All figures are reported on a cash basis, unlike previous reports in which some Middle East and North Africa ($880 million), and Africa were reported on an accrual basis. Fiscal 2007 figures have been restated accordingly. ($870 million). Education, transport, and energy and mining sector projects received $930 million, $780 million, and funds. These trust funds accepted $8.8 billion in cash contri- $770 million, respectively. Bilateral agencies contributed butions from donors (table 3.2) and disbursed $6.7 billion to $1.95 billion in cofinancing. recipients in fiscal 2008. At the end of the fiscal year, annual trust fund disbursements accounted for 26 percent of total Enhancing World Bank–IMF Collaboration disbursements from IDA, IBRD, and trust funds, up from just By drawing on complimentary expertise and institutional 12 percent at the end of fiscal 2003. comparative advantage, collaboration between the World Trust funds support a variety of development objectives Bank and IMF improves Bank effectiveness and helps at the country, regional, and global levels, ranging from more eliminate overlap. The Board strongly supported implemen- traditional country-based investments to vertical approaches tation of the Joint Management Action Plan (JMAP) for that target specific global priorities or support thematic areas enhancing collaboration, prepared in response to recom- of interest to the international development community. For mendations of the External Review Committee on IMF-Bank country-based investments, which are executed by the collaboration (The Malan Report). Board members high- recipient, a large part of disbursements during fiscal 2008 lighted the value of encouraging greater mobility between supported public administration and law, health and social the Bank and the IMF. They called for ongoing support from services, and education. For global programs, most disburse- senior management for JMAP implementation and diligent ments were made through vertical funds such as the Global monitoring of progress. 64 THE WORLD BANK ANNUAL REPORT 2008 THE WORLD BANK ANNUAL REPORT 2008 Office of the Publisher, External Affairs Team Leader Richard A. B. Crabbe Editor Cathy Lips Assistant Editor Belinda Yong Editorial Production Cindy A. Fisher Aziz Gökdemir Mary C. 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