44128 SECOND QUARTER 2007 ·Editorial: Lebanon's Resilience and the Will to Move Forward .............................................................................................................................................................................................3 · The Government of Lebanon Embarks on Bold ­ and Long-Overdue ­ Social Reforms ........................................................................................................................ 4 · Energy Sector: Prime Target of the Reform Drive ........................................................................... 7 ·Recent Economic Developments ................................................................................................................................................ 8 · US$327,000 Grant to Improve Environmental Laws ........................................................................ 11 ·Bank Group Operations ...................................................................................................................................................................................... 13 ·News, Recent and Upcoming Activities ................................................................................................................................ 16 ·Recent World Bank Publications .............................................................................................................................................................. 18 Joseph Saba, Country Director Tel. (202) 473-2992 - Fax (202) 477-1482 World BankAddress: E-mail: jsaba@worldbank.org 1818 H Street, NW Washington, DC 20433 Sophie Warlop, OperationsAnalyst Tel. (202) 473-7255 - Fax. (202) 477-1482 www.worldbank.org E-mail:swarlop@worldbank.org To Order World Bank Publications: Sabah Moussa, ExecutiveAssistant http://publications.worldbank.org/ecommerce Tel. (202) 473-9019 - Fax (202) 477-1482 E-mail: smoussa@worldbank.org For Information on World Bank Programs in Lebanon: www.worldbank.org/mna/lebanon Demba Ba, Country Manager Chadi Bou Habib, Economist E-mail: dba@worldbank.org Email: cbouhabib@worldbank.org, Tel. Ext: 233 Haneen Sayed, Lead Operations Officer Mouna Couzi, Senior ProgramAssistant E-mail: hsayed@worldbank.org, Tel. Ext. 229 Email: mcouzi@worlbank.org, Tel. Ext 231 Radwan Shaban, Lead Country Economist May Ibrahim, ProgramAssistant E-mail: rshaban@worldbank.org, Tel. Ext. 246 Email: mibrahim@worldbank.org, Tel. Ext. 245 Robert Maurer, Lead Urban Sector Specialist Sophie Urnechlian, ProgramAssistant E-mail: rmaurer@worldbank.org, Tel. Ext. 224 Email: surnechlian@worldbank.org SebnemAkkaya, Senior Economist E-mail: sdessus@worldbank.org, Tel. Ext. 225 The World Bank Office in Beirut Robert Bou Jaoude, Senior Financial Management United Nations House, Sixth Floor Specialist Riad El Solh 1107-2270 E-mail: rboujaoude@worldbank.org, Tel. Ext. 230 P. O. Box: 11-8577 Beirut - Lebanon Eileen Murray, Senior Operations Officer E-mail: emurray@worldbank.org, Tel. Ext. 303 Tel. (961-1) 987-800 Fax (961-1) 986-800 Hadia Samaha Karam, Operations Officer www.worldbank.org/lb E-mail: hsamaha@worldbank.org, Tel. Ext. 241 Lina Fares, Procurement Specialist E-mail: lfares@worldbank.org, Tel. Ext. 244 Editorial Team: Anna Bjerde Mona Ziade, Communications Officer Chadi Bou Habib Email: mziade@worldbank.org, Tel. Ext. 239 Julia Brickell Mona El-Chami, Financial Management Specialist SebnemAkkaya E-mail: melchami@worldbank.org, Tel. Ext. 223 Zeina El Khalil Joseph Saba Diana Masri, Financial Management Specialist Maria Sarraf E-mail: dmasri@worldbank.org, Tel. Ext. 238 Haneen Sayed Mona Ziade Zeina El Khalil, Public InformationAssociate E-mail: zelkhalil@worldbank.org, Tel. Ext. 234 With special thanks to Mary Saba 2 Second Quarter 2007 EDITORIAL Lebanon's Resilience and the Will to Move Forward Despite daunting political and security challenges, there of duplication in service delivery and improved pro- is broad consensus in Lebanon on pushing ahead with gram implementation among the Ministries of Social the Reform Program unveiled at the International Con- Affairs, Education and Public Health; (ii) reviewing ference for Support of Lebanon, or Paris III. Although the mandate and programs of MoSA, revisiting the the program envisages broad reform measures with organizational structure and implementing process re- impact from 2008 onwards, the Government has in the engineering and automation of MoSA; and (iii) estab- meantime undertaken substantive initiatives to kick start lishing a targeting mechanism as a first step towards the Paris III program in a short period of time under the implementation of social safety nets for the poor extremely difficult circumstances. and vulnerable population. These initial steps improve the chances for the Reform The Ministry of Health has developed a strategy for Program to gain momentum as the political dust settles. upgrading primary healthcare services, targeted inter- They have also demonstrated Lebanon's enormous resil- ventions for maternal and child mortality reduction and ience, and raised credibility with the international com- institutionalization of public hospital accreditation. munity that has committed US$7.6 billion to reverse the country's social and economic woes. Separately, the National Social Security Fund (NSSF) is buildingontheBank'sexpertisetodevelopareformpro- With Parliament effectively paralyzed by the political gram that would expand the coverage of the social insur- polarization, the Government has focused its work on ance system (pension and health insurance), strengthen reforms that are authorized and under existing laws and NSSF governance and administration, improve NSSF therefore do not require new legislation.To this purpose, financial sustainability and strengthen income protec- a Government survey identified 106 interventions to tion policies. launch implementation of the reform program. Simul- taneously, to prepare for the reconvening of Parliament, The World Bank is preparing a strategy note for a one draft bills are being readied to facilitate yet deeper year period that would include up to US$175 million reform interventions. in assistance, conditioned on implementation of the Paris III agenda. The program offers broad-based sup- In a bold and commendable move, the Government has port to the Paris III agenda, but essential reforms to the established a process that ensures strong ownership of Social Protection and Energy Sectors will form the core the reform program and shared responsibility among of the planned work program and financial assistance. public institutions. It has created three specialized Inter- While ensuring improvements to service delivery, these MinisterialCommittees(IMC)toworkontheeconomic, reforms are critical for achievement of the medium-term social, and infrastructure and privatization pillars of the macro-fiscal targets. Indeed, the energy sector, which program. These committees are testimony to the Gov- has suffered from poor governance for years, is the sin- ernment's drive towards greater inclusiveness, transpar- gle largest drain of government resources and a barrier ency and accountability. to much needed growth. Recognizingthatwide-ranging,deepstructuralreformsof InthisissueofUpdate,theeditorialteamwillpresentthe thetypethatLebanonneedscannotbeimplementedwith- Bank's work program in these important reform areas. out simultaneously: (i) addressing the social protection In addition to energy and social protection, the Bank has agenda; and (ii) reversing the fiscal drain from inefficien- embarked on a broad effort to assist Lebanon in making cies, much of theWorld Bank's work in Lebanon over the more efficient use of its own resources as well as tak- pastfewmonthshasbeenfocusedonthepowersectorand ing critical measures to permit private sector growth for improvements in social service delivery and systems. new jobs. It is not business as usual; it is business most unusual for a small country facing so many challenges, The Ministry of Social Affairs (MoSA) is focusing in yet determined to overcome. the short-term on three work streams: (i) elimination Second Quarter 2007 3 TheGovernmentofLebanonEmbarksonBold­ andLong-Overdue­SocialReforms While political uncertainty continues, the Government its pre-war reform program. The war led to significant and the National Social Security Fund (NSSF) are nev- social and economic disruption, and its aftermath tested ertheless actively pursuing needed social reforms with the resilience of the Lebanese economy and people. the assistance of the World Bank. Building on past gov- The political gridlock and instability within the country ernment plans, these reforms are part of the Reconstruc- have stifled the growth of traditional economic sectors, tion, Reform and Recovery package unveiled by the especially tourism, and placed enormous pressures on Government of Lebanon at the Paris III Donor Confer- Government spending. In recognition of these social and ence. The program aims to enhance social protection economic challenges, and capitalizing on international in parallel with other policy measures to stimulate eco- and regional donor assistance, the Government grew nomic growth, increase the efficiency of fiscal spending determined to push ahead with fundamental reforms in and reduce poverty and vulnerability. the human development sector. It aims to bring about fundamental change in its social protection and social Lebanon is a country prone to periodic shocks, some assistance systems. generated at home, others externally. Given this, Leba- non needs a much stronger and expanded social protec- These policy reforms build on a long-standing agenda to tion system1, including health insurance, pensions and transform and modernize the NSSF, as well as to intro- a well-targeted cash assistance program for the poor duce important changes to the policies and programs and the vulnerable. Unique to the region, Lebanon does enforced at the Ministry of Social Affairs (MoSA) and not have a pension system for private sector workers. the Ministry of Public Health (MoH). The NSSF, rep- What exists is an end-of-service-indemnity for private resenting the core institution of the social protection sector employees (though the public sector and military system in Lebanon, is plagued with systemic problems have separate pension plans). Its health insurance sys- threatening its financial sustainability and its ability to tem is fragmented, costly and formally caters to only fulfillitsmandate.TheMoSAisprovidinglimitedsocial 50 percent of the population. Formal safety nets are assistance but could nevertheless improve the targeting small, scattered and not targeted to the poor and vul- efficiency of its coverage by adopting new mechanisms nerable. The country relies on an informal network of to better allocate its resources to the poor and the vulner- social services, which act as a safety net (Non-Govern- able. Similarly, the MoH is providing health coverage mental Organizations,welfareassociations,remittances, for the uninsured and the poor which is not means-tested etc.) But these are susceptible to economic and political and is oriented primarily towards expensive hospital- shocks. The reliance on predominately private, and pri- based care. marily confession-based, safety nets can be a factor in deepening the sectarian divide. The lack of an adequate Tackling the Giant public safety net means that Lebanon does not have a tool to help absorb shock from economic adjustment The mandate of the NSSF is to provide health insur- that can be used to reach the poor directly. ance coverage, and end of service indemnity, and family allowance benefits to private sector workers and their Reforms in Times of Uncertainty dependants. It has a governing board of 26 members representing the Government, private employers and Since the 2006 summer conflict, the Government has worker unions. It operates under the umbrella of the been pursuing economic recovery and a continuation of Minister of Labor, and its revenues come from private sector contributions, Government transfers and invest- 1 ment income. Social protection is defined as a collection of public measures to improve or protect human capital, ranging from labor market policies and programs, publicly mandated Over the years, the NSSF has been unable to modernize unemployment or old-age and disability insurance, to its core business functions, financial management sys- rehabilitation services and social assistance including cash tem and its human resource policies. Its business func- and in-kind income support. 4 Second Quarter 2007 tions of collection, beneficiary registration, contracting and vulnerable households, including individuals and and payments are severely out of mode and not under- families facing difficult life circumstances such as dis- pinned by modern technology. Its financial management ability, family dysfunction, loss of parents, delinquency, system is still based on cash accounting and needs to be physical and mental abuse, etc. Safety nets provide a transitioned to a more effective accrual-based system. minimum level of income support to poor households Its human resource composition lacks the modern skills enabling them to undertake higher return but higher risk to operate a modern social security-system. Along with earning activities. these severe institutional constraints, there are funda- mental problems with the design of the three schemes MoSA allocates close to 70 percent of its budget (a mere currently operated by the NSSF: the End of Service 0.3 percent of GDP) to NGOs on the assumption they Indemnity Fund (pension), the Sickness and Maternity deliver services to the poor and needy in their communi- Fund (health insurance); and the FamilyAllowance fund ties. There is currently no reliable mechanism to know (social assistance). whether the intended beneficiaries are indeed being reached. Governments world-wide have adopted mod- The current End of Service Indemnity Fund operated by ern and scientific methods for selecting and monitoring the NSSF suffers from several important weaknesses. It intermediaries for providing social services, and this is does not provide adequate income support for pension- also under way in Lebanon. In addition, Governments ers and distorts the labor market, and, by design, it is are increasing adopting social assistance measures that not financially sustainable. The Sickness and Maternity would directly target the poor and vulnerable. One such Fund is already in financial deficit due to weak actu- method, applicable for Lebanon, is called the proxy- arial underpinnings and excessive and un-monitorable means testing (PMT) targeting mechanism.This mecha- expenditure on expensive inpatient care, outpatient care nism allows the Government to test eligibility for social and drugs. The Family Allowance Fund, similarly, is in assistance in an environment where strict means-testing deficit, because of the imbalance between revenues and (income and asset tests) is not possible. Tried in many covered benefits. developing countries with characteristics like Lebanon, PMT targeting can be effective in enabling the Govern- The current reform plan of the Government, supported ment to focus its assistance where it is mostly needed. by theWorld Bank, is aiming to tackle these problems in The World Bank is currently working with MoSA on close cooperation with the board and management of the implementing a PMT mechanism in Lebanon. NSSF. The objective of the reform plan is to strengthen and expand the role of the NSSF as the institution at the The MoH acts as the insurer of the last resort for those core of Lebanon's social protection system. It aims to not covered by the NSSF and the other insurers in the improve services to its clients, while ensuring its own country. It covers only hospital-based care and cer- financial sustainability. The reform plan consists of four tain pharmaceutical expenses and is supposed to pro- main areas: (i) developing a policy framework for health vide coverage for only the poor and the uninsured (e.g. insurance in Lebanon which would define the man- pensioners). But in practice it is not means- tested. The date of the various players (NSSF, MoH, others); (ii) MoH provides support primarily through expensive hos- strengthen governance and administration of the NSSF; pital care and not through outpatient services. Its claims (iii) bring about financial sustainability of the NSSF; processing system has been computerized, but at pres- and (iv) implement a new pension system once Parlia- ent is not being used effectively to reduce the number ment approves the draft pension law. of inappropriate admissions. The coverage is pre-autho- rized by MoH medical control officers, but no explicit Improving the Targeting of Social admission protocols are followed. This system has few Assistance and Health Spending in-built control measures to control hospital expendi- tures and is also complicated by the changes in cover- age associated with other insurance funds (e.g. by rising Economic growth is necessary but not sufficient to unemployment that deprives previously covered persons ensure that all members of society participate in and from insurance). benefit from it. This would require well-designed and implemented social safety net policies and interventions The Bank is also providing assistance to MoH to ratio- that contribute to more inclusive growth and enhance nalize its expenditures through a number of reform efficiency. The objective of the social safety net policies measures: (i) introducing an effective utilization review and programs is to complement the benefits of growth and management system; (ii) designing and putting into andimprovethewelfareofchronicallyandtransientpoor Second Quarter 2007 5 place a public-private strategy to make greater use of needsshouldbeimplementedalongsidetheGovernment's the public sector services for MoH beneficiaries; and boldsocialprotectionagenda.Thisagenda,aimstoreform (iii) setting an administrative cap on the monthly ceil- the NSSF, the institution at the core of Lebanon's social ings of the negotiated MoH contracts with the private protectionsystem.Italsoseekstoestablishamodern,sci- sector hospitals. Along with these measures to rational- entific targeting system. If properly implemented, these ize overall hospital expenditures, there is an initiative to reforms answer to the needs of all Lebanese, regardless help the Ministry of Health to bring greater predictabil- of confession, region or political affiliation.All parties in ity and financial stability to its core primary health care Lebanon need to rise above their political and sectarian services and public health functions. These measures, sensitivities and rally behind this opportunity to serve the taken collectively, will ensure a re-alignment in MoH nation at large.The price of inaction or lack of agreement expenditures with more broad-based and effective pub- is too high for Lebanon and its future generations. lic health and primary healthcare programs. Moving Forward As discussed in the editorial of this newsletter, wide- For more information, contact Ms. Haneen Sayed, ranging, deep structural reforms of the type that Lebanon Lead Operations Officer, hsayed@worldbank.org 6 Second Quarter 2007 EnergySector:PrimeTargetoftheReformDrive On January 25, 2007, the Government of Lebanon pre- Finally, but very importantly, the sector has for too long sented a comprehensive Reconstruction, Recovery and severely drained the Government's budget resources Reform Program that was warmly welcomed by the through enormous subsidies that were needed to operate international donor community and attracted US$7.6 the sector. In tandem with the increase in international billion in pledges of financial support. The World Bank oil prices and a deterioration in the overall efficiency pledged up to US$700 million to the Paris III, augment- of the sector (due to insufficient billing and technical ing an earlier US$70 million LebanonTrust Fund (LTF). losses), the subsidy requirements have doubled in the ThelatterwasaGrantfromtheBank'ssurplus,extended past few years to reach 3.3 percent of the Gross Domes- to Lebanon in the aftermath of the hostilities with Israel tic Product (GDP) in 2006, excluding debt servicing. in the summer of 2006. This comes to a dollar a day per person in Lebanon. ThefirstBank-supportedoperationisnowwelladvanced What Will the Reforms Do? and comprises a Reform Implementation Development Policy Loan. This operation supports a set of reforms The energy reform program being supported aims to under the Government's Paris III program. These focus achieve service reliability, cost reduction and overall onkeyareas,wherechangealreadyhasbegun:(i)energy goodgovernanceofthesector. Theactionsinthereform sector reform; (ii) modernization of the business envi- program include: ronment; and (iii) social protection reform. The opera- tion places particular emphasis on a first set of energy · Restructuring EdL through corporatization to pave reforms and key measures to enhance Lebanon's public the way for eventual privatization. financial management system. · Reducinglossesthroughinvestmentinremotemeter- ing and rehabilitating the distribution network. Why Energy Sector Reforms? · Improving billing and collection through more accu- rate consumption data, as well as better enforcing The energy sector plays an instrumental role in deliv- bill collection under private sector management. ering growth and fiscal sustainability to Lebanon. The poor service provided by the sector was identified in · Lowering of the electricity generation through a con- the Investment Climate Assessment (ICA) of 2006, as version from using expensive gas-oil to natural gas. a major barrier to businesses in Lebanon. According to · Overall, better supervising the sector through the the ICA, consumers incur 220 interruptions of service already established Inter-Ministerial Reform Com- per year on average (133 interruptions in Beirut and 300 mittee under the chairmanship of the Prime Minis- outsideofBeirut). Theaveragefirmreportslosingseven ter, and the eventual establishment of a sector regu- percent of its sales value due to these interruptions. The latory agency. most affected firms are textile and clothing firms, which report losing 10 percent of sales, and hotels, which esti- The loan will be presented to the World Bank Board for mate their losses at 9 percent as a result of power inter- approval onAugust 2, 2007. ruptions. Residentialconsumersalsosuffersubstantially from the unreliable services of the national power util- ity, Electricité du Liban (EdL), and are forced to pay for alternative backup arrangements, often through a fixed For more information, contact Ms. Anna Bjerde, monthly fee (regardless of the amount of consumption). Lead Energy Specialist, abjerde@worldbank.org Second Quarter 2007 7 EconomicDevelopmentsintheFirstQuarterof2007 Political and security challenges, with detrimental absorption. Compensated checks2 declined by 0.3 per- consequences on economic activity, marred the start cent in nominal terms between Q1-06 and Q1-07, and of 2007. The impact was most apparent in the tourism by 5 percent when deflated by the Consumer Price Index sector and private investment activity, albeit less percep- (CPI). Another indicator that reflected the evolution of tible on the real sector in general. The reconstruction domestic absorption3 were expenditures on imports of infrastructure moved forward with strong Arab and which increased by 15 percent. Finally, public demand international involvement. There also was some recov- was another growing component of domestic absorp- ery in the agriculture and industry sectors, although fac- tion, with primary public expenditures4 increasing by tories that were destroyed during the hostilities in the 25.7 percent in Q1-07 compared to Q1-06. summer of 2006 have not yet been reconstructed. Fiscal Developments The landmark development for Lebanon in the First Quarter of 2007 (Q1-07) was the International Con- Fiscal data for the First Quarter showed a contin- ference for Support of Lebanon, or Paris III, on Jan- ued increase in expenditures and deficits, despite uary 25, 2007. The international community pledged good revenue performance. Total deficit increased US$7.6 billion, mostly in soft loans, over five years to to LBP993 billion from LBP608 billion in 2006. finance both the reform program presented by the Gov- ernment, and a series of projects, with the private sec- tor being an integral part of the economic revival effort. Figure 1. Cumulative Public Deficit in the While only few funds were disbursed in Q1-07, the First Quarter for the Years 1999­2006 major impact of Paris III was to strengthen the monetary (LBP billion) and financial sectors in Lebanon against any confidence crisis in an environment where politics, economy and fiscal situations were not at their best. Indeed, deposits and money supply continued to grow at a strong pace, and stock exchange was on the rise. Real Sector Developments Lebanon's real economic growth showed signs of recovery in Q1-07. The high liquidity in the region and strong international support helped strengthen economic activity in the Quarter, despite adverse political devel- opments. However, this remains lower than Lebanon's growth potential, which is already weak, not exceed- ing three percent1. Moreover, since demand indicators Source: Lebanese Ministry of Finance, World Bank staff showed contradictory signs, it was difficult to reach calculations. clear growth projections. On the foreign demand side, for example, there was a 6.8 percent decline in the num- ber of passengers arriving at Beirut Airport in Q1-07, compared to the same period last year. This would sug- 2 Compensatedchecksareaproxyfordomestictransactions, gest a decline in foreign demand.Yet, 20 percent rise in which are mainly private sector operations. exports indicated a strong demand for Lebanese goods. 3 Domestic absorption (or total expenditures) is the sum Netting the two tendencies to get the total impact on of consumption and gross domestic investment. The ratio growth remains difficult. The same goes for domestic of imports of goods and non-factor services to domestic absorption has been around 32 percent on average between 1997 and 2004. 1 Source: Exploring Lebanon's Growth Prospects ­ World 4 Primary public expenditures historically amounted to 15 Bank ­ June 2006. percent of share domestic absorption. 8 Second Quarter 2007 Primary balance declined to LBP120 billion compared maturity and interest rate was due to the re-issuance of to LBP339 billion in Q1-06. This was largely due to the maturing US$1 billion Eurobonds5 in February 2007 at increase in expenditure: total expenditure increased by higher maturities and higher interest rates. 22.7 percent as a result of a combination of a 17.7 per- cent rise in debt service and a 25.7 percent increase in External Sector non-debtexpenditures.Debtserviceincreaseddueto:(i) an increase in debt stock by 8.5 percent between March Foreign accounts suffered from the negative impact 2006 and March 2007; and (ii) an increase in average of the unstable political and security conditions. The interest rates on debt instruments in domestic currency trade in goods deficit increased by US$240 million (see paragraph below). Primary expenditures increased between Q1-06 and Q1-07. This was due to a 15 percent duetoamajorriseintransferstotheelectricitycompany increase in imports to US$2.7 billion, partially com- (EdL) to LBP353 billion in Q1-07, from LBP66 billion pensated by a 20 percent increase in exports to US$622 in Q1-06. While large and amounting to 70 percent of million. Export of services declined as evidenced in a the rise in primary expenditures, this increase in trans- 6.8 percent drop in the arrival of passengers at Beirut fers to EdL should, however, not be totally attributed to Airport in Q1-07, compared to the same period in 2006. deterioration in EdL finances. Indeed, since September Furthermore, net foreign assets declined by US$100 2005, theAlgerian and Kuwaiti oil companies have been million in Q1-07 against a US$662 million increase dur- supplying EdL with fuel oil and gas oil, and the Govern- ing the same period in 2006; which suggested a decline mentstartedpayingforallpurchases(oldandnew)inthe in net inflow of services, income, transfers and capital summer of 2006. On a positive note, cumulative budget to US$2 billion from US$2.5 billion in Q1-06. Finally, revenues increased by 10 percent as of end-March 2007, non-resident deposits in commercial banks declined by compared to end-March 2006, with 66 percent of the 7.6 percent in Q1-07, compared to end-2007. increase reflecting a 17.5 percent rise in both customs and ValueAdded Tax (VAT) receipts. Figure 2. Change in Net Foreign Assets The increase in public debt accelerated in Q1-07, in (USD million) line with the deterioration of fiscal balances. Gross public debt reached LBP62,157 billion at end-March 2007, increasing by 1.9 percent since end-2006, com- pared to a 1.3 percent increase between end-2005 and March 2006. Debt denominated in LBP increased by 3.7 percent in Q1-07, while debt denominated in for- eign currencies remained unchanged. Consequently, the share of debt denominated in foreign currency declined to 49.6 percent in March 2007 from 50.5 percent at end-2006. On the other hand, the composition by type of holder also changed in Q1-07. Indeed, the increase in the debt portfolio held by the BdL amounted to 81 percent of the total debt increase. Greater Central Bank involvement in financing the deficit raised its share in the total debt to 20.7 percent from 19.6 percent at end- 2006.The average maturity of domestic debt declined to Source: Central Bank, World Bank staff calculation. 1.44 years from 1.61 years in December 2006, while the average weighted interest rate remained stable at 8.59 percent, which corresponds, in effect, to a rise in inter- In line with the decline in foreign accounts, Central est rates. On foreign currency debt, average maturity Bank reserves have been on a downward trend since rose to 6.53 years from 6.4 years in December 2006, the beginning of the year. Gross foreign currencies and weighted interest rates also increased to 7.22 per- reserves first increased from US$10.2 billion in Decem- cent from 7.18 percent.The rise in foreign currency debt ber 2006 to US$10.5 billion in January 2007, and then 5 The maturing US$1 billion had a maturity of 2 years US$431 million, has a 14 year maturity with an 8.25 percent and an interest rate of 6.5 percent. The re-issuance is of two interest rate. The combination of the two tranches gives an tranches: a US$569 million tranche with a maturity of one average maturity of 7 years and an average new interest rate year and a 6.375 percent interest rate. The second tranche, of 7.18 percent for the US$1 billion issuance. Second Quarter 2007 9 declined to US$9.6 billion in March. In terms of goods Money Supply (M3) kept the same dynamics as imports, gross reserves declined to 10.7 months in Q1- in Q1-06, suggesting a growing insulation of the 07, from 13 months for the whole year 2006. monetary sector from political and economic developments. M3 increased by 1.8 percent as of Prices, Money and Banking end-March 2007, compared to end-December 2007. A year earlier, M3 increased by 1.9 percent during the The Consumer Price Index (CPI) continued to First Quarter. The most dynamic component of the increase in the First Quarter of 2007, after its pace Money Supply was resident deposits in foreign cur- acceleratedinthesummer2006conflictanditsimme- rency which increased by 2.15 percent, while resident diate aftermath. The CPI increased by 5.2 percent on deposits in LBP increased by 1.6 percent. Money in average in Q1-07 against a decrease by 0.3 percent in circulation declined by 6.4 percent. From the coun- terparts'side, the changes in net claims on public sec- tor alone accounted for 71 percent of the change in Figure 3. Counterparts of the Money Supply Money Supply, thus pointing to the growing financing (USD million) of the deficit, more specifically by the Central Bank, during the First Quarter of the year. Change in net foreign assets contributed to only 18 percent of the increase in M3. The interest rate continued to increase in Q1-07, but at a moderate pace despite the rise in political and security risks. The average interest rates on LBP- denominateddepositsincreasedbyonlytwobasispoints since December 2006.This is due to the continued stabi- lization policy followed by the Central Bank, reinforced by the positive impact of large international support to Lebanon in the Paris III conference. Average interest Source: Central Bank, World Bank staff calculation. rates on US$ deposits increased by 12 bpt between end- 2006 and March 2007. Q1-06. This upward trend in the CPI is also in line with the price increase observed in several countries in the The political instability increased the volatility of region following the rise in regional oil wealth. How- the Beirut Stock Exchange (BSE). The BLOM index ever, inflation in Lebanon further accelerated during and for the BSE increased by 3 percent during Q1-07. The after the summer 2006 hostilities. Indeed, while CPI index has increased by 0.6 percent in January, and increased by 1.4 percent in the First Half of 2006 com- then remained stable in February, before increasing by pared to the same period in 2005, inflation increased by 2.4 percent in March. In contrast, the index increased 6.4 percent in the Second Half, and the upward tendency steadily during the same period of last year, rising by continued in Q1-07. 19.6 percent between end-2005 and end-March 2006. 10 Second Quarter 2007 US$327,000 Grant to Improve Environmental Laws "Resource and Environmental Management" is one Legislation Development and Application System in of three pillars of the World Bank's Country Assistance Lebanon. Strategy for Lebanon. As such, it is no wonder that the Bank has focused attention and allotted resources to Legislation Enforcement is the Key the preservation of the country's limited, yet important, resources and to the reversal of serious environmental While the number of environmental legislative texts is degradation that has afflicted the country over the years, a good indicator of the environmental maturity of the more specifically during the years of strife. country and its efforts toward sustainable development, the enforcement of such legislation is what really dic- Commitment to Better Environment tates whether it has an effective impact on the environ- ment or not. Just before the 2006 summer hostilities, the World Bank underscored its commitment to this vital sec- Region-Wide Environmental tor. On July 5, 2006, the Bank approved a Grant of Awareness US$327,000 to the Government of Lebanon to improve the enforcement of environment legislation. After the Increasingly, the Middle East and North Africa region end of the conflict, the Bank pushed through with the is growing more aware of the costs and benefits of envi- grant, signaling confidence in Lebanon's resilience and ronmental degradation, thanks to estimates published in ability to overcome distress. 2000 by theWorld Bank in collaboration with the Medi- terranean Environmental Technical Assistance Program What is an IDF Fund? (METAP). The cost of environmental degradation in Lebanon at that time was estimated at between 2.8 and The Grant is funded through the Institutional Develop- 4.0 percent of the Gross Domestic Product (GDP). The ment Fund (IDF), an important instrument that helps mean estimate was close to US$565 million per year, or build institutional capacity in the fields of financial and 3.4 percent of GDP. procurementprocedures,monitoringandevaluationsys- tems and judicial reforms. This is the second IDF grant MENA Catches up with the Rest of approved by the World Bank for Lebanon. The first one the World aimed to develop an HIV/AIDS monitoring and evalua- tion system at the Ministry of Health. Mounting international focus on environmental degra- dation has whetted the appetite of MENA governments, Lebanon Acts to Improve the and estimates released so far have served as a wake-up Environment call to policy makers regarding the need to accelerate the process of regulatory laws. In Lebanon, there is no Despite last summer's setback, and the political con- real shortage of laws, but their enforcement remains straints that ensued, Lebanon had already taken con- very limited. siderable strides towards environmental policy imple- mentation and legislation development. Several key Post-War Degradation Serious Environmental Laws have been adopted by Parlia- ment in recent years, including, among others, the all- A World Bank Study conducted after the summer 2006 important Framework Law for the Protection of the conflict unveiled a variety of damages related to the Environment (2002) and the Hunting Law (2004). In environment. The hostilities caused direct impacts on addition, an Integrated Waste Management Law and natural resources by affecting the coastal area, water various other decrees have been drafted, albeit still resources, air, forests, quarries and waste. Some of the awaiting Parliament's endorsement. This effort has most striking degradation was caused by an oil spill, recently culminated in the publication by the Min- which affected the marine biodiversity and taxed the istry of Environment of the State of Environmental economy on the coast. Second Quarter 2007 11 What will the World Bank Grant Do? mental lawyer has been recruited and has started work at the Ministry of Justice. The World Bank Grant will srengthen the capacity of the Ministry of Justice (the main beneficiary of the A Litmus Test for MENA Grant) to improve the level of enforcement of laws pro- hibiting further degradation. The World Bank will work A successful implementation of this activity, which is jointly with the Ministry of Environment and the United new to Lebanon and unique in the region, will definitely Nations Development Program (UNDP) to implement encourage its replicability in other countries. While the Grant. judicial systems vary widely across countries, the meth- odology selected to implement this grant (such as pro- Capacity Building, Too ducing an on-line data base of environmental jurispru- dence, introducing a course in the institute of judicial The project includes reviewing, and comparing with training and establishing a list of environmental experts international case studies, the environmental juris- testimony database) can be useful to other countries in prudence in Lebanon, establishing an environmental enforcing environmental legislation. expert testimony database, introducing a course on environmental law at the Institute of Judicial Training and raising awareness on environmental policies and For more information, contact Ms. Maria Sarraf, legislation in the legal community through widespread Senior Environmental Economist, dissemination of information. As of today, an environ- msarraf@worldbank.org 12 Second Quarter 2007 BankGroupOperations IBRD Ongoing Projects (b)introducingappropriatesectorreforms­particularly, the development and strengthening of the capacity of the The current World Bank portfolio in Lebanon con- existing Ba'albeck Hermel Water and IrrigationAuthor- sists of six projects for a total commitment amount of ity and, once it is established, the Beka'a Regional US$284.60 million, of which US$150.14 million had Water Authority; and (c) involving the private sector in been disbursed by June 30, 2007. the operation and maintenance of water and wastewa- ter facilities by preparing for a Management Contractor Education Development Project (EDP) (US$44.6 mil- (MC) through a lease or concession contract that would lion). This Project is designed to support the Govern- secure the long term financial needs for sector invest- ment's efforts to enhance the capacity of the Ministry ments. The project was approved in June 2002. of Education to function as an effective manager of the education sector and to restore the credibility of the Urban Transport Development Project (UTDP) Public Education System. The project was approved in (US$65.0 million). The Project's objectives are to pro- March 2000. vide the city of Beirut and the Greater Beirut Area with the basic institutional framework that is currently lack- First Municipal Infrastructure Project (FMIP-I) ing, and to support critical investments needed to maxi- (US$80.0 million). This Project aims to address urgent mize the efficiency of existing urban transport infra- municipal works while setting the stage for the gradual structure. The Project was approved in June 2002. assumption of responsibility for municipal services at the local level. The Project was approved in June 2002. Cultural Heritage and Urban Development Project (CHUD) (US$31.5 million). The Project will finance Community Development Project (CDP) (US$20.0 site conservation, enhancement investments, associated million). This Project is designed to raise living stan- urban infrastructure improvements in selected sites and dards in targeted poorer communities, and to raise eco- provide technical assistance to strengthen the capacity nomic activity levels in such communities by investing of the Directorate General of Antiquities, Ministry of in grass-roots social and small infrastructure activities Tourism and targeted municipalities in cultural heritage and in employment creation. The Project was approved preservation and tourism development. The Project was in June 2001. approved inApril 2003. Ba'albeckWaterandWastewaterProject (US$43.5mil- lion). The major development objectives of the Project For more information on projects, please visit: include: (a) improving the access of satisfactory water http://www.worldbank.org/lb. supply and wastewater services to the region's residents; Commitments and Disbursements as of June 30, 2007 Approval Loan Amount Closing Project Name Year Amount Disbursed Date US$ Million Education Development 2000 44.58 25.84 Dec. 2007 First Municipal Infrastructure 2000 80.00 68.07 June 2008 Community Development 2001 20.00 11.00 Mar 2007 Ba'albeck Water and Wastewater 2002 43.53 15.01 Sep. 2008 Urban Transport Development 2002 65.00 21.50 June 2009 Cultural Heritage and Urban Development 2003 31.50 8.72 Dec. 2009 Total 284.61 150.14 Second Quarter 2007 13 IBRD Ongoing Grants planningprocessesrelatedtopost-hostilitiesreconstruc- tion. As such, it is expected to identify social policies First Municipal Infrastructure Supplemental Project and interventions to help those affected by the hostilities (US$30.0 million). This Grant aims to restore basic ser- and vulnerable segments of the Lebanese society. The vices and rebuild municipal infrastructure in the areas Grant aims to fill a serious information gap on liveli- hardest hit during the summer 2006 hostilities, and pro- hoods and social conditions. vide technical assistance to and build the capacity of municipalities to mitigate the impact of hostilities on There are also two Institutional Development Fund municipal finances. (IDF) grants currently under implementation that pre- date the hostilities. They support: (1) a program to Mechanism for National Reconstruction (US$1.25 strengthen the capacity of national HIV/AIDS surveil- million). The Grant supports the establishment by the lanceandmonitoringandevaluationsystems($350,000) Government of Lebanon of a system to manage and and (2) a program to strengthen the capacity of the Min- monitor the reconstruction funding in an effective and istry of Justice and the Ministry of Environment in judi- transparent manner, promoting international standards cial enforcement in environmental affairs ($327,000), and good practice. implemented by UNDP. RapidSocialandLivelihoodsAssessment(US$99,000). The objective of the Grant is to feed into the strategic IFC Projects in Lebanon microfinance in conflict areas with Lebanese microfi- nance institutions to help them develop techniques to Since the recent hostilities in the summer of 2006, the recover from the hostilities International Finance Corporation (IFC) has focused its activities on supporting the recovery of the private sec- Administrative Barriers Survey ­ The joint World Bank/ tor, and in continuing technical assistance efforts with IFC Foreign Investment Advisory Services group has the Government of Lebanon to ease the administrative finalized a survey of administrative barriers in Lebanon burden on the private sector. to identify reforms necessary to improve Lebanon's busi- ness environment. Discussions are now underway on a IFC is in the process of implementing a series of projects program to implement the survey recommendations. in the financial sector, all aimed at providing access to financeforSmall-andMedium-Enterprises(SMEs)which Business Enabling Environment ­ IFC continues its were directly or indirectly affected by the hostilities. To work on a technical assistance agreement with the Min- further support the private sector, IFC has expanded the istry of Economy and Trade to assist in the reform and trade finance lines held with three banks, both by increas- streamlining of the business registration process. This ing the overall amounts of these lines and lengthening program will take approximately one year and will their tenor. The trade finance activity is complemented tackle one of the issues in which Lebanon performed by a number of lines opened to banks for on-lending to most poorly in the Doing Business Survey. the private sector, and the establishment of a Guarantee Facility for SMEs. This Guarantee Facility is also sup- Corporate Governance ­ In partnership with the Asso- ported by the World Bank trust funds for the Facility. ciation of Lebanese Bankers, IFC undertook a compre- hensive review of Corporate Governance practices in the In addition to its traditional lending activities, IFC's Banking Sector in Lebanon. Now, IFC is rolling out an Private Enterprise Partnership for the Middle East and extended Corporate Governance program that will focus North Africa (PEP-MENA), a US$100 million, donor- on raising standards in businesses across all sectors financed technical assistance facility has focused on a number of areas relating to recovery from the hostilities Gender ­ As part of a wider regional program, IFC and to implementing administrative reform. recently completed a survey of barriers to women entre- preneurs in Lebanon. This survey examines current Microfinance Portfolio Recovery ­ IFC sponsored a practices in Lebanon compared to other countries in the roundtable program to match international experts in region and will soon be published. 14 Second Quarter 2007 MIGA in Lebanon infrastructureandmanufacturingsectorsforinvestments in Cote d'Ivoire, Lebanon has been a member of the Multilateral Invest- ment Guarantee Agency (MIGA) since 1994. Over the Ghana, Sierra Leone, Gambia, Guinea and Syria. Eli- past decade, MIGA has received more than 20 prelimi- gible investors include those from MIGA-member nary applications from investors in Austria, Canada, countries investing in Lebanon, Lebanese nationals France, Luxembourg, SaudiArabia and Spain for invest- repatriating funds for investments in Lebanon, as well mentsinLebanoninthefinance,infrastructure,telecom- as Lebanese investors investing in developing countries, munications and tourism sectors. including the Middle East region. In addition, the Lebanese investor community has The Investment Development Authority of Lebanon become increasingly interested in MIGA's ability to (IDAL), Lebanon's Investment Promotion Agency, has provide non-commercial risk coverage for their invest- submitted to MIGA a NeedsAssessment request. MIGA ments in other developing countries. In fiscal year 2002, performed the Needs Assessment in March 2006. The MIGA issued US$8.1 million in guarantees to Invest- Needs Assessment will benchmark IDAL's investment com, a Lebanese-owned company, for a telecommuni- promotion capacity relative to international best prac- cations project in Benin involving the installation of a tices and recommend steps to improve IDAL's ability to new GSM mobile telephone network. Lebanon is one attract FDI into Lebanon. of the lowest teledensity countries in the world. In fiscal year 2003, MIGA issued US$56 million in Guarantees MIGA's online investment promotion services (www. to Investcom's investment in Spacetel, Syria's second fdixchange.com and www.ipanet.net) feature 130 docu- mobile telephone network. Also, Lebanese investors ments on investment opportunities and the related legal have submitted preliminary applications in the finance, and regulatory environments in Lebanon. Second Quarter 2007 15 News,RecentandUpcomingActivities IFC Signs New Agreements in Support of the Power Sector, Small Business Financing and Retail Business The International Finance Corporation (IFC), the pri- IFC's risk-sharing facility of up to US$25 million will vate sector arm of the World Bank Group, signed on help Bank of Beirut increase access to finance for the June 15, 2007, new agreements targeting: (i) the Elec- private sector, particularly for smaller businesses. A tricity Sector; (ii) Small Business Financing; and (iii) US$15 million credit line investment in Credit Libanais, the Lebanese retail business. The agreements are part one of the country's largest banks, will help the bank of the World Bank Group's pledges at the Paris III reach more people through diverse services. Through donor community conference to support Lebanon. The the agreements, IFC will help provide term funding to signing ceremony was held at the Grand Serail under private sector enterprises that are recovering from the the auspices of Prime Minister Fuad Siniora, Minister conflict. IFC's investment will help increase financing to of Finance Jihad Azour and Minister of Economy and SMEs, an important engine of growth and job creation. Trade Sami Haddad. IFC Director for the Middle East and North Africa, Michael Essex, signed on behalf of Strengthening Lebanon's private sector is a key priority the financial institution. forIFC.TheCorporationischannelinguptoUS$200mil- lionthroughbankstoincreaseaccesstofinanceforprivate Public Private Partnership in the Power Sector sector companies and individuals affected by the conflict. IFC concluded its first public-private partnership advi- On a recent visit to Lebanon, Lars Thunell, IFC's Execu- sory agreement withtheGovernmentofLebanontohelp tive Vice President and Chief Executive Officer, signed buildanewindependentpowerplantandestablishacon- agreements to provide financing to BLOM Bank and cession for an existing 450-megawatt electricity facility Fransabank. He also signed an advisory services package in DeirAmmar with private sector participation. to scale up Kafalat, a local company whose guarantees help smaller businesses obtain commercial bank loans. As explained in the Energy Sector article in this issue of the Update, Lebanon has long suffered from wide- Expansion in the Retail Business ­ADMIC Sal spread electricity shortages, which have increased as IFC signed an investment agreement with ADMIC Sal, a result of the conflict in 2006. With support from the Lebanon's largest retail chain, to support its plan to World Bank Group, the country has begun to reform its open a new department store and restructure its ongo- electricity sector, with the aim of reducing electricity ing operations. These efforts will help restore consumer losses, increasing operational efficiencies and improv- confidence in the economy in times of distress such as ing the quality and reliability of power infrastructure the current situation. and supply. Through this project, IFC will help the Government develop the framework for private sec- TheUS$20millionfinancingrepresentsIFC'sfirstinvest- tor participation in electricity generation and ensure mentintheLebaneseretailsector. ItincludesaUS$13.5 transparency in the bidding process. The project will million loan and a US$6.5 million equity investment. also provide a model for public-private partnerships in The success ofADMIC Sal - a retailer that incorporates other sectors. best practice modern retailing methods--is important to the country's retail sector and, more broadly, to the Small Business Financing through the Bank of economy, which has been saddled with repercussions of Beirut and Credit Libanais political polarization. ADMIC Sal is sending a strong, IFC signed two agreements with Bank of Beirut and positive message as its operations return to stability and Credit Libanais as part of its overall strategy to extend it prepares to open a new department store, encouraging financing to banking intermediaries, helping the private a return of shoppers that would also benefit its suppli- sector and Small-and Medium- Enterprises (SMEs) ers and other retailers. IFC's investment exemplifies a recover from the recent conflict in Lebanon. renewal of confidence in the country and enhances the company's ability to serve its customers. 16 Second Quarter 2007 Introducing the World Bank to Syria The World Bank organized on June 17-18, 2007, a two- in a number of vital sectors in various countries of the day workshop in Damascus to introduce the institution's Middle East and North Africa Region, namely educa- mission, structure and operations to senior Syrian policy tion, water, infrastructure and financial development, makers and officials. demonstrating how the Bank adapts to the needs of its clients and responds to their developmental agenda as an The Workshop, held in collaboration with the Ministry independent and objective partner and resource provider of Economy and Trade, was organized at the request of in financial and advisory capacities. the Government of Syria with special emphasis on how the Bank might be a partner for Syria in its economic Since 2002, the Bank has been providing the Govern- development drive. ment of Syria with limited, though increasing technical assistance. The success of the technical assistance pro- A two-hour ministerial session, chaired by Deputy gram, increasing contacts in a number of important eco- Prime MinisterAbdallah Dardari, started the workshop. nomic spheres and a proven ability of the Bank to con- It was followed by a full-day session, co-chaired by the tribute to Syria's economic reform program prompted Minister of Economy and Trade Amer Lutfi and World an agreement to develop a more strategic relationship Bank Country Director Joseph Saba with the participa- to be expressed in an Interim Strategy Note (ISN). The tion of about 70 senior public sector officials, deputy ISN would establish a development partnership to pro- ministers and heads of departments, representatives of vide selective Bank assistance at Syria's request for private sector firms, private research centers, the media, poverty reduction, human development, growth and the European Union and the Japan International Coop- improved environmental management in furtherance erationAgency (JICA). of Syria's Tenth Five-Year Development Plan. Avail- able Bank instruments would include: investments and The agenda included an overview of the Bank's mission, guarantees for key projects; analytical, knowledge and theWorld Bank Group's five agencies, its organizational capacity building services; and sectoral technical assis- structure, funding sources and lending cost structure. tance. Explanation of these instruments and the ways The workshop also covered the Bank's products and ser- and means for their use is important to enable Syria to vices, including the project cycle and policies governing make informed demands for services. operations. It provided cases of the Bank's engagement Second Quarter 2007 17 RecentWorldBankPublications Global Development Finance 2007 (Vol I. Analy- government, legal and institutional framework to hold sis and Outlook): The Globalization of Corporate government to account; fighting corruption; external Finance in Developing Countries (ISBN: 978-0-8213- accountability and the role of supreme audit institutions 6977-7, SKU 16977). Global Development Finance on detecting fraud and corruption. 2007,I:AnalysisandOutlookistheWorldBank'sannual review of recent trends in and prospects for financial Little Data Book 2007 (ISBN: 0-8213-6965-2, ISBN- flows to developing countries. This year's special top- 13: 978-0-8213-6965-4, SKU: 16965). The Little Data ics access of low-income countries to commercial debt Book 2007 provides data for 54 key development indica- markets and financial globalization of corporate sector tors in a single page for each of the World Bank mem- in developing countries highlight two areas of growing ber countries and other economies with populations of importance to the future growth and financial stability of more than 30,000. These more than 200 country pages emerging market economies. are supplemented by aggregate data for regional and income groupings. With analysis and data extending from short-term bank lending to long-term bond issuance in both local and The data topics include: foreign currency, Global Development Finance 2007 · People is unique in its breadth of coverage of the trends and · Environment issues of fundamental importance to the financing of the · Economy developing world, including coverage of capital raised · Technology and infrastructure by developing country based corporations. The report is · Trade an indispensable resource for governments, economists, · Finance investors, financial consultants, academics, bankers, and the entire development community. The Little Green Data Book 2007 ISBN: 0-8213- 6967-9, ISBN-13: 978-0-8213-6967-8, SKU: 16967. World Manga: Passages (ISBN: 978-0-8213-6917- The Little Green Data Book 2007 provides data for 50 3, SKU: 16917). A collection of all six 1 World Manga key environmental indicators in a single page for each of titles in one comprehensive volume, Passages follows the World Bank member countries and other economies the adventures of Rei as he falls in love, gets attacked with populations of more than 30,000. These more than by a shark, rides an elephant, watches a man dig up a 200 country pages are supplemented by aggregate data skeleton, solves the mystery of a lagoon with vanishing for regional and income groupings. fish, is kidnapped by brutal mercenaries, exposes corrupt public officials, and even transforms into a girl-ewww! The data topics include: And, in the course of this graphic novel, Rei and his ani- ·Agriculture mal spirit guide encounter the depths of poverty, disease, · Forests and biodiversity global warming, warfare, discrimination, and corruption. · Energy But through courage, compassion, and their indomitable · Emissions and pollution human spirit, he and his friends take on life's challenges · Water and sanitation in places where the odds are stacked against them - yet · Environment and health leave the world better off for having passed through it. · National accounting aggregates Performance Accountability and Combating Cor- The Little Data Book on Information and Commu- ruption (ISBN: 978-0-8213-6941-8, SKU: 16941). nication Technology 2007 (ISBN: 978-0-8213-6973-9, This volume provides an analytical framework and SKU: 16973). This new addition to the Little Data Book operational approaches needed for the implementation seriespresentsat-a-glancetablesforover140economies of results-based accountability. The volume makes a showing the most recent national data on key indicators major contribution to the literature on public manage- of information and communications technology (ICT), ment and evaluation. Major subject areas covered in including access, quality, affordability, efficiency, sus- this book include: performance based accountability, e- tainability, and applications. 18 Second Quarter 2007 The Little Book on External Debt 2007 (ISBN: 978-0- Making the Most of Scarcity (Arabic Edition): 8213-6969-2, SKU: 16969).The Little Book on External Accountability for Better Water Management in the Debt provides a quick reference for users interested in Middle East and North Africa. (ISBN: 0-8213-7096- external debt stocks and flows, major economic aggre- 0, ISBN-13: 978-0-8213-7096-4, SKU: 17096). Water gates, key debt ratios, and the currency composition in the Middle East and North Africa region is a source of long-term debt for all countries reporting through of major social and economic problems stemming from the Debtor Reporting system. A pocket edition of the scarcity, variability, unreliable services, and environ- Global Development Finance 2007, Volume II: Sum- mental damage. The situation is likely to become even mary and Country Tables, it contains statistical tables worse in the future, unless current practices change: for 135 countries as well as summary tables for regional by 2050 per capita availability will fall by half, water and income groups. quality will deteriorate further, and more aquifers will become depleted. Climate change is predicted to worsen Little Data Book on Private Sector Development the problems by increasing temperatures and causing 2007 (ISBN: 0-8213-7076-6, ISBN-13: 978-0-8213- more droughts and floods. 7076-6, SKU 17076). The Little Data Book on Private Sector Development 2007 is one of a series of pocket- Whilewaterprofessionalshavebeenadvocatingcompre- sized books intended to provide a quick reference to hensivewaterreformsforyearsandmanycountrieshave development data on different topics. It provides data improved their water policies and institutions, some of for more than 20 key indicators on business envi- the most politically sensitive elements of reform remain ronment and private sector development in a single untouched. This report suggests that a series of factors page for each of the World Bank member countries are now emerging that represent a potential opportunity and other economies with populations of more than to break this impasse. Turning the potential into reality 30,000. These more than 200 country pages are sup- will depend upon three things: plemented by aggregate data for regional and income · Adopting reforms that respond to the dynamics of groupings. the political economy; This book is intended as a quick reference for users · Recognizing that water policies cannot act alone, of World Development Indicators, WDI Online, and but that water outcomes are often determined by the Atlas of Global Development. It also includes data other sectors, such as trade, agriculture, finance, from the World Bank's Doing Business project and and energy; and Enterprise Surveys. · Choosing policies and practices that make gov- ernment institutions and service providers more The Many Faces of Corruption: Tracking Vulner- accountable to the public. abilities at the Sector Level (ISBN: 0-8213-6725-0, ISBN-13: 978-0-8213-6725-4, SKU: 16725). Corrup- Making the Most of Scarcity will be of interest to readers tion... How can policymakers and practitioners better working in the areas of agribusiness and markets, agri- comprehend the many forms and shapes that this social culture, urban and rural development, water supply, and pandemic takes? From the delivery of essential drugs, water resources, as well as those responsible for setting the reduction in teacher absenteeism, the containment policies in the areas of environment, economics, and of illegal logging, the construction of roads, the pro- social protection. vision of water and electricity, the international trade in oil and gas, the conduct of public budgeting and Budgeting and Budgetary Institutions (ISBN: 0- procurement, and the management of public revenues, 8213-6939-3, ISBN-13: 978-0-8213-6939-5, SKU corruption shows its many faces. The Many Faces of 16939). Budgeting and Budgetary Institutions play a Corruption attempts to bring greater clarity to the often criticalroleinresourceallocation,governmentaccount- murky manifestations of this virulent and debilitating ability, and improved fiscal and social outcomes. This social disease. It explores the use of prototype road volume distills lessons from practices in designing maps to identify corruption vulnerabilities, suggests better fiscal institutions, citizen friendly budgets, and corresponding "warning signals," and proposes opera- open and transparent processes of budget preparation tionally useful remedial measures. The Many Faces of and execution. It also highlights newer concepts of per- Corruption is thus an invaluable reference for policy- formance budgeting, accrual accounting, activity based makers, practitioners, and researchers engaged in the costing, and the use of information and communication business of development. technology in budgeting. These tools of analysis are Second Quarter 2007 19 supplemented by a review of budgeting in post-conflict Also available: countries and two country case studies on the reform of budgeting systems. Gender and Development in the Middle East and North Africa: Women in the Public Sphere Local Public Financial Management (ISBN: 0-8213- (ISBN: 0-8213-5676-3 SKU: 15676). 6937-7, ISBN-13: 978-0-8213-6937-1, SKU: 16937). Transparent and prudent local financial management has Unlocking the Employment Potential in the come to be recognized as critical to the integrity of local Middle East and North Africa: Toward a New public sector and to gaining and retaining trust of local Social Contract residents. Such integrity and trust is sometimes lacking (ISBN: 0-8213-5678-X SKU: 15678). insomelocalgovernmentsindevelopingcountries,espe- cially in theAfrica region. This book attempts to provide Better Governance for Development in the practical guidance to local governments interested in Middle East and North Africa establishing sound financial management systems. (ISBN: 0-8213-5635-6 SKU: 15635). Local Budgeting (ISBN: 0-8213-6945-8, ISBN-13: Trade, Investment, and Development in the 978-0-8213-6945-6, SKU: 16945). This book provides Middle East and North Africa: Engaging with a comprehensive treatment of all aspects of local bud- theWorld (ISBN: 0-8213-5574-0 SKU: 15574). geting needed to develop sound fiscal administration such as setting priorities, planning, financial control over inputs, management of operations and accountabil- Ordering World Bank Publications ity to citizens. Topics covered include fiscal administra- Phone: (001) 800-645-7247 tion, forecasting, fiscal discipline, fiscal transparency, or (001) 703-661-1580 integrity of revenue administration, budget formats, and processes including performance budgeting, and capital Fax: (001) 703-661-1501 budgeting. On-Line: http://publications.worldbank.org/ecommerce E-Mail: books@worldbank.org Annual World Bank Conference on Development Economics 2007, Regional: Beyond Transition. Research and working papers are also available in (ISBN: 0-8213-6843-5, ISBN-13: 978-0-8213-6843-5, electronic format free of charge at: SKU 16843). This annual conference is a global gath- http://econ.worldbank.org/ ering of the world's leading scholars and practitioners. Among the attendees are participants from developing countries, think tanks, NGOs and international institu- Data and Statistics tions. This book addresses issues such as: · Inequality and growth in transition The World Bank offers multiple databases online, some · Trade liberalization, inequality and poverty in freeofcharge,andsomeonanannualsubscriptionbasis. LatinAmerica and the Caribbean Almost all the data reported in the site mentioned below are derived, either directly or indirectly, from official · Can economic policy overcome geographic dis- statistical systems organized and financed by national advantage in Eastern Europe and the Common- governments. wealth of Independent States? · Patterns of spatial convergence and divergence in India and China To access the on-line databases, visit: http://www.worldbank.org/data/ 20 Second Quarter 2007